Efficiency-wage theories suggest that a firm may pay workers more than the market-clearing wage for all of the following reasons except to:
A) reduce labor turnover.
B) improve the quality of the firm's labor force.
C) increase worker effort.
D) reduce the firm's wage bill.

Question

Quizplus · Accepted Answer

Efficiency-wage theories suggest that firms may pay workers more than the market-clearing wage to achieve better outcomes such as reducing labor turnover, improving the quality of workers, increasing worker effort, and enhancing workers' motivation. However, paying higher wages would not reduce the firm's wage bill. Therefore, option D is the correct answer.

Efficiency-Wage Theories Suggest That a Firm May Pay Workers More