Suppose new electronic devices make it easier to monitor the effort levels of workers. If some shirking is still possible in the efficiency wage model, what happens to the level of employment?
A) Increases, but some unemployment remains
B) Increases, and the labor market reaches full employment
C) Decreases
D) Does not change

Question

Quizplus · Accepted Answer

Even with the ability to monitor worker effort more easily, some shirking may still be possible. This means that the efficiency wage model predicts that there will still be some unemployment, although it may be reduced. Therefore, the level of employment will increase but some unemployment will still remain.

Suppose New Electronic Devices Make It Easier to Monitor the Effort