An efficiency wage is:A) above the equilibrium wage and is paid to provide workers with an incentive to increase productivity.B) efficient because it is exactly equal to the wage rate implied by the marginal productivity theory.C) determined by collective bargaining between unions and management.D) equal to the value of the marginal product of labor adjusted so as to make the structure of compensation more equitable.

Question

An efficiency wage is:A) above the equilibrium wage and is paid to provide workers with an incentive to increase productivity.B) efficient because it is exactly equal to the wage rate implied by the marginal productivity theory.C) determined by collective bargaining between unions and management.D) equal to the value of the marginal product of labor   adjusted so as to make the structure of compensation more equitable.

Viviana Garza · Accepted Answer

Final Answer : A, Explanation :  An efficiency wage is a wage that is intentionally set above the equilibrium wage rate in order to provide workers with an incentive to increase productivity, reduce turnover, and improve the quality of the hiring pool. This approach is based on the idea that workers will be more motivated to work hard and stay with their employer if they feel that they are being paid a fair wage that reflects their effort and contribution to the firm.

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