Asked by Jessica Lazur on Apr 28, 2024
Verified
According to the theory of efficiency wages, it may be profitable for firms to keep wages high even in the presence of a surplus of labor.
Efficiency Wages
Wages that are deliberately set above the market equilibrium to increase productivity, reduce turnover, or improve the quality of applicants.
Labor Surplus
A situation in the labor market where the supply of labor exceeds the demand for labor, often leading to unemployment.
- Grasp the fundamentals and implications of efficiency wages, noting their role in the mitigation of shirking and the reduction of turnover within firm structures.
Verified Answer
VR
Veronica RogersApr 28, 2024
Final Answer :
True
Explanation :
The theory of efficiency wages suggests that paying higher wages can lead to increased productivity, lower turnover, and better quality applicants, which can offset the higher wage costs and be profitable for firms even when there is a surplus of labor.
Learning Objectives
- Grasp the fundamentals and implications of efficiency wages, noting their role in the mitigation of shirking and the reduction of turnover within firm structures.
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