If productivity increases as wages increase and firms pay a wage above the market clearing wage, then

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Paying a wage above the market clearing wage can lead to higher productivity and lower employee turnover, leading to potential benefits for the firm in the long run. However, it may also result in lower profit levels and difficulty in competing with other firms that pay lower wages. Option A is incorrect as it assumes that firms paying higher wages will not be able to compete, which may not necessarily be true. Option B is incorrect as it assumes that firms with higher wages will have excess demand for labor, which may not always be the case. Option C may be true in some cases, but it is not a necessary consequence of paying higher wages.

If Productivity Increases as Wages Increase and Firms Pay a Wage