$$\begin{array} { c c c }
\begin{array} { c }
\text { Real wage rate Quantity of labor demanded } \
\text { (2005 dollars } \
\text { (millions of hours } \
\text { per hour) }
\end{array} & \begin{array} { c }
\text { Quantity of labor supplied } \
\text { (millions of hours } \
\text { per month) }
\end{array} \
\hline 7.15 & 90 & 25 \
7.65 & 70 & 32 \
8.00 & 60 & 60 \
8.50 & 45 & 70 \
9.00 & 20 & 85 \
\hline
\end{array}$$
-The table above gives the labor market for a small foreign economy. A(n) ________ would create ________.

Question

$$\begin{array} { c c c } 
\begin{array} { c } 
\text { Real wage rate Quantity of labor demanded } \
\text { (2005 dollars } \
\text { (millions of hours } \
\text { per hour) }
\end{array} & \begin{array} { c } 
\text { Quantity of labor supplied } \
\text { (millions of hours } \
\text { per month) }
\end{array} \
\hline 7.15 & 90 & 25 \
7.65 & 70 & 32 \
8.00 & 60 & 60 \
8.50 & 45 & 70 \
9.00 & 20 & 85 \
\hline
\end{array}$$
-The table above gives the labor market for a small foreign economy. A(n) ________ would create ________.

Quizplus · Accepted Answer

An efficiency wage is a wage rate set above the market equilibrium wage in order to increase productivity and reduce turnover. In this case, an efficiency wage of $9.00 would create an increase in job rationing because at that wage rate, only 20 million hours of labor are demanded, while 85 million hours are supplied. This means that there are many workers who are willing to work at that wage rate, but there are not enough jobs available. As a result, job rationing would increase.

-The Table Above Gives the Labor Market for a Small