According to efficiency wage models,labor productivity depends on
A) the number of employees at a firm; the smaller the number of employees,the more productive each employee is.
B) the amount of capital that employees have to work with.
C) the wage rate the firm pays its employees; a cut in wages can cause labor productivity to decline.
D) whether or not the economy is currently producing Natural Real GDP.
E) none of the above

Question

Quizplus · Accepted Answer

Efficiency wage models propose that paying higher than market-clearing wages can increase worker productivity, motivation and reduce shirking. Therefore, a cut in wages may cause a decline in labor productivity because workers may reduce effort or quit.

According to Efficiency Wage Models,labor Productivity Depends on