The theory of efficiency wages asserts that
A) unions are often successful in forcing employers to pay higher wages.
B) employers strive to hold wages below equilibrium levels.
C) employers may find it profitable to pay above-equilibrium wages.
D) efficient workers actually earn lower wages than those earned by inefficient workers.

Question

Quizplus · Accepted Answer

The theory of efficiency wages suggests that employers may find it profitable to pay wages above equilibrium levels because doing so can lead to higher morale, reduced turnover, and an increased incentive for workers to be more productive. This can result in lower total labor costs and increased profits for the firm. Therefore, choice C is the best answer as it accurately describes the theory of efficiency wages.

The Theory of Efficiency Wages Asserts That