Paying an above-equilibrium wage rate might reduce unit labor costs by
A) permitting the firm to attract lower-quality labor.
B) increasing the opportunity cost to workers of being fired for shirking.
C) increasing voluntary worker turnover.
D) increasing the supply of labor.

Question

Quizplus · Accepted Answer

Paying an above-equilibrium wage rate increases the opportunity cost to workers of being fired for shirking. This implies that workers are more likely to work harder while on the job, which increases productivity and reduces the unit cost of production.

Paying an Above-Equilibrium Wage Rate Might Reduce Unit Labor Costs