Which of the following is the effect of anything that makes the efficiency wage rise relative to the market-clearing wage on the quantities of labour demanded and supplied?

Question

Quizplus · Accepted Answer

If the efficiency wage rises relative to the market-clearing wage, then the wage paid by firms is now higher than what the market would dictate. This means that firms may not be willing to hire as many workers as before at this higher wage rate, so the quantity demanded of labour decreases. At the same time, workers may now be more willing to supply their labour at this higher wage rate, so the quantity supplied of labour increases. Therefore, the net effect is a decrease in the quantity demanded and an increase in the quantity supplied of labour.

Which of the Following Is the Effect of Anything That