Juanita decides to hire some additional workers for her vinyl siding factory. The equilibrium wage is $14 per hour. Efficiency wage theory suggests that it is reasonable for Juanita to offer
A)$14 per hour.
B)less than $14 per hour, since some people would be willing to work for less.
C)less than $14 an hour to prevent shirking.
D)more than $14 per hour, so as to attract a better pool of applicants.

Question

Quizplus · Accepted Answer

Efficiency wage theory suggests that paying workers more than the equilibrium wage can increase productivity and reduce shirking. By offering a wage higher than $14 per hour, Juanita can attract a better pool of applicants who are more motivated to work hard and less likely to shirk. Therefore, option D is the best choice.

Juanita Decides to Hire Some Additional Workers for Her Vinyl