The theory of efficiency wages explains why
A)setting wages at the equilibrium level may increase unemployment.
B)it may be in the best interest of firms to offer wages that are above the equilibrium level.
C)the most efficient way to pay workers is to pay them according to their skills.
D)it is efficient for firms to set wages at the equilibrium level.

Question

Quizplus · Accepted Answer

Efficiency wage theory suggests that paying above-equilibrium wages can increase worker productivity, reduce turnover, and attract higher-quality applicants, which can be beneficial for firms.

The Theory of Efficiency Wages Explains Why