Which of the following creates unemployment by keeping wages above the equilibrium level?
A)unions but not efficiency wages.
B)efficiency wages, but not unions.
C)neither efficiency wages nor unions.
D)both efficiency wages and unions.

Question

Quizplus · Accepted Answer

Both efficiency wages and unions can create unemployment by keeping wages above the equilibrium level. Efficiency wages refer to a situation where firms pay wages above the market equilibrium in order to increase worker productivity and reduce turnover. This can lead to unemployment if the higher wages result in fewer job openings. Similarly, unions can negotiate higher wages for their members, which can lead to unemployment if the higher wages create a surplus of workers seeking employment.

Which of the Following Creates Unemployment by Keeping Wages Above