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Efficiency wage theories claim that firms may pay high real wages in order to:

A) Reduce production costs
B) Attract more workers
C) Increase worker productivity
D) Comply with legal regulations

1 Answer

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Final answer:

Efficiency wage theories suggest that higher real wages are paid by firms in order to increase worker productivity and retain well-motivated employees, thereby reducing costs related to hiring and training.

Step-by-step explanation:

The efficiency wage theory posits that firms may choose to pay higher real wages as a strategic move to enhance worker productivity. By paying above-market wages, employees are incentivized to work harder as they are likely to face a decrease in salary should they lose their current job, creating a motivation to excel and maintain employment. Furthermore, it allows employers to minimize costs associated with hiring and training by retaining current, well-motivated workers.

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