Efficiency wages are wages that are above the equilibrium level, paid by firms to incentivize their workers to be more productive and efficient. This can lead to job rationing because some workers may be willing to work for a lower wage, but the firm is only willing to hire a certain number of workers at the higher efficiency wage level.

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Efficiency Wages Are

Question 158

Multiple Choice

Efficiency wages are

A) the legal minimum wage a firm can pay a worker.
B) a possible cause of job rationing because they drive wages below their equilibrium level.
C) a possible cause of job rationing because they drive wages above their equilibrium level.
D) a possible cause of job rationing because they force wages to equal their equilibrium level.
E) another name for the equilibrium wage.

Correct Answer: