According to the theory of efficiency wages, firms operate more efficiently if they can pay wages that are below the equilibrium level.

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Quizplus · Accepted Answer

The theory of efficiency wages actually states the opposite - firms operate more efficiently if they pay wages that are above the equilibrium level. This is because higher wages can attract more skilled and motivated workers, leading to lower turnover, higher productivity, and ultimately higher profits.

According to the Theory of Efficiency Wages, Firms Operate More