The efficiency wage model contains the assumption that labor productivity __________ the wage rate,so that a firm maximizing its profits __________ pay workers an above-market wage rate.
A) is independent of; may
B) is independent of; will never
C) depends on; may
D) depends on; will never

Question

Quizplus · Accepted Answer

The efficiency wage model assumes that labor productivity depends on the wage rate, meaning that higher wages can lead to increased productivity. Therefore, a firm maximizing its profits may be willing to pay workers an above-market wage rate to increase productivity and ultimately benefit the firm.

The Efficiency Wage Model Contains the Assumption That Labor Productivity