Efficiency wages are:
A) above equilibrium to encourage better performance.
B) below equilibrium to encourage better performance to get a raise.
C) responsible for all structural unemployment.
D) above equilibrium to encourage better performance and are responsible for all structural unemployment.

Question

Quizplus · Accepted Answer

Efficiency wages are wages that are set above the equilibrium level in order to motivate workers to be more productive, reduce turnover, and improve quality. They are not responsible for all structural unemployment, as there are many other factors that can contribute to it. Therefore, the best choice is A, which correctly describes the purpose of efficiency wages.

Efficiency Wages Are