Observing that Costco pays its employees much more than Walmart does leads economists to think
A)Costco is paying an efficiency wage in an effort to maximize profit.
B)Costco employees have a powerful union.
C)Costco's owners are not interested in maximizing profits.
D)Walmart is consistently breaking Canada's labour laws.
E)Costco's ownership must be more motivated by fairness than Walmart.

Question

Quizplus · Accepted Answer

The fact that Costco pays its employees much more than Walmart suggests that Costco is paying an efficiency wage. An efficiency wage is a wage that is higher than the market wage to motivate workers to be more productive and stay with the company for a longer time, which leads to better customer service and higher profits in the long run. This suggests that Costco's management is interested in maximizing profits in the long run, which is consistent with the goal of most businesses. The other choices are less likely based on the information given.

Observing That Costco Pays Its Employees Much More Than Walmart