The theory of efficiency wages challenges the assumption that
A) workers are efficient.
B) workers have an incentive to shirk their responsibilities to their employers.
C) wages adjust to balance labor supply and labor demand.
D) firms sometimes choose to pay their workers above-equilibrium wages.

Question

Quizplus · Accepted Answer

Efficiency wage theory suggests that firms pay above-equilibrium wages to increase productivity, reduce turnover, and discourage shirking, which challenges the assumption that wages always adjust to balance labor supply and demand.

The Theory of Efficiency Wages Challenges the Assumption That