Efficiency wages
A)create a shortage of labor, and so reduce unemployment.
B)create a shortage of labor, and so raise unemployment.
C)create a surplus of labor, and so reduce unemployment.
D)create a surplus of labor, and so raise unemployment.

Question

Quizplus · Accepted Answer

Efficiency wages are wages that are higher than the market equilibrium wage rate. This results in firms hiring fewer workers than they would if they paid a lower wage rate. Therefore, efficiency wages create a surplus of labor, which leads to higher unemployment.

Efficiency Wages