The idea of efficiency wages is that
A) the wages of each type of labor must be proportionate to their marginal products.
B) the wages of each type of labor must be equal to their marginal products.
C) firms might get greater work effort by paying above-equilibrium wage rates.
D) workers are more diligent when paid below-equilibrium wages.

Question

Quizplus · Accepted Answer

Efficiency wages refer to paying above-equilibrium wages to workers in order to motivate them to work harder and be more productive. This is based on the idea that workers will feel more valued and committed to their job if they are paid a wage that is higher than what they could earn elsewhere. This can lead to increased job satisfaction and loyalty, which in turn can lead to higher productivity and profitability for the firm.

The Idea of Efficiency Wages Is That