Efficiency wages are:
A) market equilibrium wages.
B) set above equilibrium wages to act as an incentive for better performance.
C) set below the equilibrium wage to increase profits.
D) allowed to be below minimum wage.

Question

Quizplus · Accepted Answer

Efficiency wages are wages that are set above the market equilibrium wage, with the intention of increasing worker productivity and performance. This is done by providing workers with an incentive to work harder and produce more, as they are being paid more than they would be in a competitive labor market. As a result, firms that pay efficiency wages often have lower turnover rates, higher quality employees, and higher overall profits.

Efficiency Wages Are