In the efficiency wage model,if the real wage is higher than the market-clearing wage so that there is an excess supply of labor
A)firms will hire new workers at lower wages.
B)firms will replace high-paid workers with low-paid, formerly unemployed workers.
C)employers will not hire workers who are willing to work for a lower wage.
D)firms will demand a higher level of effort from existing employees.

Question

Quizplus · Accepted Answer

In the efficiency wage model, firms pay above the market-clearing wage to increase productivity and reduce turnover. Hiring workers at lower wages would undermine this strategy, so employers will not hire workers willing to work for less.

In the Efficiency Wage Model,if the Real Wage Is Higher