Mary Ellen is the newly appointed CEO of a company that packages cereal on an assembly line. Her staff has told her that the output the firm produces, given the number of workers employed, indicates that some workers may be shirking. According to efficiency wage theory, what should she do?

Question

Quizplus · Accepted Answer

According to efficiency wage theory, paying workers more than the equilibrium wage rate can increase their motivation and reduce shirking, ultimately leading to higher overall productivity and profits for the company. Option B would likely only exacerbate the problem by further demotivating workers and potentially leading to higher turnover. Option C may not provide enough incentive for workers to perform at their best, and option D would lead to reduced profits and potentially job loss.

Mary Ellen Is the Newly Appointed CEO of a Company