Question

Efficiency wages are:

A) responsible for all structural unemployment.
B)above equilibrium to encourage better performance and are responsible for all structural unemployment.
C) below equilibrium to encourage better performance to get a raise.
D) above equilibrium to encourage better performance.

Answer 1

Efficiency wage theory states that workers' productivity is influenced by their pay, leading employers to pay more than market conditions dictate to motivate employees and minimize costs of hiring and training new workers.

Step-by-step explanation:

Efficiency wage theory argues that workers' productivity depends on their pay, and so employers will often find it worthwhile to pay their employees somewhat more than market conditions might dictate. One reason is that employees who receive better pay than others will be more productive because they recognize that if they were to lose their current jobs, they would suffer a decline in salary.

As a result, they are motivated to work harder and to stay with the current employer. In addition, employers know that it is costly and time-consuming to hire and train new employees, so they would prefer to pay workers a little extra now rather than to lose them and have to hire and train new workers. Thus, by avoiding wage cuts, the employer minimizes costs of training and hiring new workers, and reaps the benefits of well-motivated employees.

Answer 2

Efficiency wage theory argues that workers' productivity depends on their pay and employers will often pay their employees more to motivate them and reduce costs of training and hiring new workers.

Step-by-step explanation:

Efficiency wage theory argues that workers' productivity depends on their pay, and so employers will often find it worthwhile to pay their employees somewhat more than market conditions might dictate. One reason is that employees who receive better pay than others will be more productive because they recognize that if they were to lose their current jobs, they would suffer a decline in salary.

As a result, they are motivated to work harder and to stay with the current employer. In addition, employers know that it is costly and time-consuming to hire and train new employees, so they would prefer to pay workers a little extra now rather than to lose them and have to hire and train new workers. Thus, by avoiding wage cuts, the employer minimizes costs of training and hiring new workers, and reaps the benefits of well-motivated employees.