The efficiency-wage theory of worker turnover suggests that firms with higher turnover will have
A)higher production costs and higher profits.
B)higher production costs and lower profits.
C)lower production costs and higher profits.
D)lower production costs and lower profits.

Question

Quizplus · Accepted Answer

According to the efficiency-wage theory, firms that pay higher wages than the market wage to their employees can reduce turnover and increase worker productivity. However, if firms cannot attract the most productive workers, they must pay higher wages to retain less productive workers, leading to higher production costs. This can result in lower profits for the firm. Therefore, firms with higher turnover are likely to have higher production costs and lower profits.

The Efficiency-Wage Theory of Worker Turnover Suggests That Firms with Higher