Suppose that Nabil wants to pay efficiency wages to help in the redesign of his basement. If the prevailing wage rate for electricians is $76 per hour in his area, one possible efficiency wage he could pay would be:
A)$72.
B)$76.
C)$88.
D)the minimum wage.

Question

Quizplus · Accepted Answer

Efficiency wage is the wage rate paid by the employer which is higher than the market equilibrium wage rate in order to motivate employees to work more efficiently. Since Nabil wants electricians to work efficiently in redesigning his basement, he may offer them an efficiency wage.

Out of the given options, the prevailing market wage rate is $76 per hour. If Nabil pays the same wage rate as the market, there may not be enough motivation for the electricians to work more efficiently. Therefore, options A and B can be ruled out.

On the other hand, option D (minimum wage) is the least wage rate that an employer can pay its employees. This is not an appropriate wage rate to offer as an efficiency wage as it is significantly less than the prevailing market wage rate.

Option C ($88) is higher than the market wage rate and provides an incentive for the electricians to work more efficiently. Therefore, the best choice would be C as it meets the criteria for an efficiency wage.

Suppose That Nabil Wants to Pay Efficiency Wages to Help