Which of the following statements about efficiency wage theory is true?
A) Paying above the competitive equilibrium wage tends to cause workers to shirk their responsibilities.
B) Firms do not have a choice about whether they pay efficiency wages or not because law does determine these wages.
C) Paying the lowest possible wage is always the most efficient (profitable).
D) Paying above the competitive equilibrium wage may improve worker health, lower worker turnover, improve worker quality, and increase worker effort.

Question

Quizplus · Accepted Answer

Efficiency wage theory suggests that paying above the competitive equilibrium wage may lead to benefits such as improved worker quality, increased worker effort, lower worker turnover, and better worker health. This is because a higher wage can incentivize workers to work harder and/ or stay with the company for longer. Option A is incorrect because paying above the competitive equilibrium wage can actually serve as an incentive for workers to exert more effort in their jobs, rather than shirking their responsibilities. Option B is incorrect because firms do have a choice in determining whether they pay efficiency wages or not. Option C is incorrect because paying the lowest possible wage may lead to a lower quality of workers and higher worker turnover, which can ultimately be more costly for the firm in the long run.

Which of the Following Statements About Efficiency Wage Theory Is