An efficiency wage premium serves the same function as a bond because,just as with a bond,the premium represents
A) the amount the employee loses if caught shirking.
B) the expected value of the amount the employee loses if he shirks.
C) the cost of monitoring the employee.
D) the gain to the employee if he shirks.

Question

Quizplus · Accepted Answer

The efficiency wage premium serves as an incentive for employees not to shirk their duties because it represents the amount the employee stands to lose if they are caught not performing their tasks adequately. This is similar to a bond in that it is a form of security against undesirable behavior.

An Efficiency Wage Premium Serves the Same Function as a Bond