A wage offer that is set above the market wage and is intended to avoid the adverse selection problem is called a(n)_____

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Quizplus · Accepted Answer

An efficiency wage is a wage that is set above the market wage in order to attract high-quality workers and reduce adverse selection. This can be used by firms to incentivize workers to put forth more effort or stay with the firm longer, which can increase productivity and reduce turnover costs. Unionized wages are set by union negotiation, equilibrium wages are where supply and demand intersect in the labor market, minimum wages are set by government intervention, and indirect wages are compensation in forms other than money (such as benefits). None of these options address the adverse selection problem.

A Wage Offer That Is Set Above the Market Wage