According to the efficiency wage model,firms will pay the real wage that
A)maximizes workers' marginal productivity.
B)maximizes the marginal productivity of capital and the marginal productivity of labor together.
C)maximizes effort per dollar of real wage.
D)minimizes hiring and training costs to the firm.

Question

Quizplus · Accepted Answer

The efficiency wage model suggests that by paying a wage above the market rate, firms can increase the effort and productivity of their workers. Therefore, the firms will pay a real wage that maximizes effort per dollar of wages paid (i.e., C is the correct choice). Although A and B are related to productivity, they are not specific to the efficiency wage model, and D is not directly related to the model's assumptions.

According to the Efficiency Wage Model,firms Will Pay the Real