When a firm pays its workers above-equilibrium wages,
A)the moral-hazard problem is always worsened as a result.
B)the adverse-selection problem is always worsened as a result.
C)it may be because efficiency-wage theories are valid.
D)the Condorcet Paradox suggests the workers will work harder than if they were paid a lower wage.

Question

Quizplus · Accepted Answer

When a firm pays its workers above-equilibrium wages, it may be due to the efficiency-wage theories being valid. These theories suggest that paying higher wages can result in better work performance, reduced turnover, and increased worker health. Therefore, it is possible that paying above-equilibrium wages may be a deliberate strategy by the firm to increase productivity and profits in the long run.

When a Firm Pays Its Workers Above-Equilibrium Wages