Paying efficiency wages helps firms reduce the problem of moral hazard by:
A) generating additional profits that can be used to improve working conditions.
B) keeping labour unions from organizing workers in the firm.
C) encouraging unsupervised workers to maintain a high level of productivity.
D) providing an incentive for the best-qualified workers to remain with the firm.

Question

Quizplus · Accepted Answer

Paying efficiency wages provides workers with an incentive to maintain a high level of productivity even without direct supervision. This reduces the problem of moral hazard, as workers are less likely to shirk their duties or engage in risky behavior. Additionally, by retaining the best-qualified workers, the firm can reduce turnover costs and maintain a stable and productive workforce. However, paying efficiency wages may not necessarily result in improved working conditions, and it may not necessarily prevent labour unions from organizing workers in the firm.

Paying Efficiency Wages Helps Firms Reduce the Problem of Moral