Initially a firm pays a wage and gets an output per worker which are given index numbers of 1.00.Five possible 3 percent increases in the wage and the accompanying output per worker are as follows: 1.03 and 1.09,1.06 and 1.17,1.09 and 1.24,1.13 and 1.29,1.16 and 1.31.What is the efficiency wage?
A)1.03
B)1.06
C)1.09
D)1.13
E)1.16

Question

Quizplus · Accepted Answer

The efficiency wage is the wage at which the ratio of output per worker to wage is maximized. This can be calculated by dividing the output per worker by the wage for each option and comparing these ratios. The option with the highest ratio indicates the most efficient wage. For option D (1.13 wage), the output per worker is 1.29, which gives a ratio of 1.29/1.13 = 1.1416, which is the highest among the given options, indicating that the wage of 1.13 is the most efficient.

Initially a Firm Pays a Wage and Gets an Output