Figure 19-1
-Refer to Figure 19-1. Suppose the local labor market was in equilibrium to begin with but then the largest local employer decided to change its compensation scheme to $9. Which of the following compensation schemes could the graph be illustrating?
A)An efficiency wage
B)Discrimination
C)A compensating differential
D)The superstar phenomenon

Question

Figure 19-1 
-Refer to Figure 19-1. Suppose the local labor market was in equilibrium to begin with but then the largest local employer decided to change its compensation scheme to $9. Which of the following compensation schemes could the graph be illustrating?
A)An efficiency wage 
B)Discrimination 
C)A compensating differential 
D)The superstar phenomenon

Quizplus · Accepted Answer

An efficiency wage is a wage that is higher than the market equilibrium wage. This is done to attract and retain the best workers. In the graph, the wage is $9, which is higher than the market equilibrium wage of $8. This suggests that the graph is illustrating an efficiency wage.

Figure 19-1 -Refer to Figure 19-1. Suppose the Local Labor Market Was