The efficiency wage is:A) a wage at which there is no unemployment, and shirking workers are not counted in the pool of total labor.B) a wage at which there is a positive amount of unemployment. Individuals who are fired for shirking will be penalized with a period of unemployment.C) a wage at which there is a shortage of labor. Firms who fire a worker for shirking will be able to hire another one easily.D) the wage that is paid to high-quality, non-shirking workers. Other workers are paid the market-clearing wage.E) the wage that subtracts the cost of shirking from the market-clearing wage to determine that which is really paid.

Question

The efficiency wage is:A)  a wage at which there is no unemployment, and shirking workers are not counted in the pool of total labor.B)  a wage at which there is a positive amount of unemployment. Individuals who are fired for shirking will be penalized with a period of unemployment.C)  a wage at which there is a shortage of labor. Firms who fire a worker for shirking will be able to hire another one easily.D)  the wage that is paid to high-quality, non-shirking workers. Other workers are paid the market-clearing wage.E)  the wage that subtracts the cost of shirking from the market-clearing wage to determine that which is really paid.

Zhongyang Jiang · Accepted Answer

Final Answer : B, Explanation :  Efficiency wage theory suggests that firms pay a wage higher than the market-clearing level to increase worker productivity and reduce shirking. This creates a situation where there is a positive amount of unemployment because not everyone who wants to work at that wage can find a job. This unemployment acts as a deterrent against shirking because workers risk a period of unemployment if they are fired for shirking.

Definitions

Learning Objectives

Learning Objectives

Related questions