An efficiency wage describes a wage rate that is:
A)above the equilibrium wage and is paid in order to provide workers with an incentive to perform efficiently.
B)efficient because it is exactly equal to the wage rate implied by the marginal productivity theory.
C)determined by collective bargaining between unions and management.
D)equal to the VMPL adjusted so as to make the structure of compensation more equitable.

Question

Quizplus · Accepted Answer

An efficiency wage is a wage rate that is set above the equilibrium wage in order to provide workers with an incentive to perform efficiently. This is done in order to reduce shirking or to attract and retain a higher quality workforce, which can ultimately increase productivity and profits in the long run.

An Efficiency Wage Describes a Wage Rate That Is