When a firm offers a wage higher than the competitive equilibrium due to high search and training costs of replacing employees they are paying___________.

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When a firm offers a wage higher than the competitive equilibrium due to high search and training costs of replacing employees, it is called an efficiency wage. This is done to motivate employees to work harder and stay longer with the company by making it less likely they will leave for a better paying job elsewhere. Minimum wages are set by the government as the lowest wage that employers can pay their workers. Competitive wages are the wages paid in the market where supply and demand determine the equilibrium wage. Premium wages are wages that are paid in addition to a regular wage, often as a bonus or incentive for good performance.

When a Firm Offers a Wage Higher Than the Competitive