An efficiency wage is one that:
A) Increases the velocity of money
B) Minimizes the firm's labor cost per unit of output
C) Results from significant changes in technology and labor
D) Is imposed by government to guarantee workers a living wage

Question

Quizplus · Accepted Answer

An efficiency wage is a wage that is set higher than the market equilibrium wage to provide incentives for workers to be more productive and reduce turnover. This can lead to an increase in the firm's overall efficiency and minimize labor cost per unit of output. Choice A is incorrect because velocity of money refers to the speed at which money is circulating in the economy and is not related to efficiency wages. Choice C is incorrect because efficiency wages are a concept related to labor economics and not specifically related to changes in technology. Choice D is also incorrect because efficiency wages are set by firms voluntarily and are not imposed by the government.

An Efficiency Wage Is One That