An efficiency wage is defined as
A)a wage above the competitive wage that elicits greater effort on the part of the workers.
B)a wage below the competitive wage that elicits greater effort on the part of the workers.
C)any wage scheme that is accepted by the union.
D)any wage scheme that pays different workers different wages.
E)any wage scheme that pays all workers the same wage.

Question

Quizplus · Accepted Answer

An efficiency wage is a wage rate that is higher than the equilibrium wage rate that would prevail in a perfectly competitive labor market. This higher wage rate is paid to increase worker productivity and reduce turnover. By paying workers more than the market rate, employers can attract a higher quality pool of job applicants and also motivate current workers to work harder and more efficiently, as they have a greater stake in keeping their higher-paying jobs. Thus choice A - a wage above the competitive wage that elicits greater effort on the part of the workers - is the correct answer.

An Efficiency Wage Is Defined as