The central idea distinguishing the "efficiency wage model" is that the wage paid by Firm A relative to the wages at other firms helps determine
A)Firm A's demand for labor.
B)the amount of labor Firm A can hire.
C)the productivity of Firm A's workers.
D)Firm A's markup fraction.

Question

Quizplus · Accepted Answer

The central idea of the efficiency wage model is that paying workers a wage above the market rate can increase their productivity and efficiency, leading to cost savings for the firm. Thus, the relative wage paid by Firm A compared to other firms can impact the productivity of its workers, and ultimately the firm's profits. Therefore, the correct answer is C, the productivity of Firm A's workers.

The Central Idea Distinguishing the "Efficiency Wage Model" Is That