Final answer:
A firm might choose to pay its employees a wage higher than that which would clear the market for reasons such as motivating employees to be more productive and avoiding costs associated with training and hiring new workers.
Step-by-step explanation:
According to efficiency wage theory, a firm might choose to pay its employees a wage higher than that which would clear the market for several reasons.
Firstly, paying higher wages can motivate employees to be more productive as they recognize that losing their current jobs would result in a salary decline. As a result, they are motivated to work harder and stay with their current employer.
Secondly, it is costly and time-consuming for firms to hire and train new employees. By paying workers a little extra now, the employer can avoid the costs associated with training and hiring new workers.
Overall, paying higher wages can lead to benefits such as well-motivated employees and cost savings for the employer.