Which set of circumstances is likely to provide the best evidence in support of the theory of efficiency wages
A)Workers in the market are unskilled and not represented by a union, and their wage exceeds the equilibrium wage.
B)Workers in the market are highly skilled and not represented by a union, and their wage exceeds the equilibrium wage.
C)Workers in the market are highly skilled and represented by a union, and their wage exceeds the equilibrium wage.
D)Workers in the market are unskilled and represented by a union, and their wage exceeds the equilibrium wage.

Question

Quizplus · Accepted Answer

The theory of efficiency wages states that higher wages can improve worker productivity and reduce turnover, ultimately leading to higher profits for firms. This theory is more applicable to highly skilled workers who have a greater impact on productivity and require more investment from firms. Also, the absence of union representation reduces the bargaining power of workers and allows firms to implement efficiency wage policies more easily. Therefore, workers in a highly skilled market without a union representation but still receiving wage higher than the equilibrium wage would provide the best evidence in support of the theory of efficiency wages.

Which Set of Circumstances Is Likely to Provide the Best