Paying efficiency wages helps firms reduce the problem of adverse selection by:
A) generating additional profits that can be used to pay for more proficient hiring managers.
B) keeping labor unions from organizing workers in the firm.
C) encouraging unsupervised workers to maintain a high level of productivity.
D) providing an incentive for the best-qualified workers to remain with the firm.

Question

Quizplus · Accepted Answer

Paying efficiency wages incentivizes higher quality workers to stay with the firm because they are being compensated above the market wage. This reduces adverse selection because only the best-qualified workers are willing to accept the higher wage, rather than a mix of high and low quality workers. This leads to a more productive and efficient workforce.

Paying Efficiency Wages Helps Firms Reduce the Problem of Adverse