Mary Sue is the newly appointed CEO of a company that manufactures CD drives on an assembly line. Her staff has told her that the output the firm produces, given the number of workers employed, indicates that some workers may be shirking. According to efficiency wage theory, which of the following should she do?

Question

Quizplus · Accepted Answer

According to efficiency wage theory, paying workers more than the equilibrium wage rate can reduce shirking as it creates an incentive for workers to work harder to keep their job and maintain their wage. By doing so, the quality and quantity of output can increase, leading to higher profits for the company. Therefore, Mary Sue should pay all workers more than the equilibrium wage rate to motivate them to work harder on the assembly line.

Mary Sue Is the Newly Appointed CEO of a Company