Question

If firms pay what are called​ "efficiency wages", they pay wages that A. are lower than average to ensure maximum profit. B. lower the cost of production to the firm. C. motivate workers to increase their productivity. D. will eventually lower the unemployment rate.

Answer 1

The correct option is (C)

Step-by-step explanation:

Efficiency wages are higher than market wages that are paid by employers to motivate employees so that they perform better and their efficiency and productivity increase. Efficiency wages are directly proportional to productivity. The more the efficiency wage, higher will be labor productivity.

Efficiency wages are lie above equilibrium level. It helps in reducing labor turnover, improve labor efficiency and attract skilled employees.