Question

_____________________ argues that the productivity of workers will increase if they are paid more, and so employers will often find it worthwhile to pay their employees somewhat more than market conditions might dictate.Efficiency wage theoryEquilibrium wage theoryEmployee wage theoryEmployer wage theory

Answer 1

Efficiency wage theory. Option A

Explanation: Efficiency wage theory is the idea that an increase in wages will lead to more productivity among workers because they will feel more motivated to work.

This is important for the employers also, because it will lead to higher productivity if they paid their employees more than what the market conditions dictate.

For example in a competitive labour market, employer A will enjoy more productivity and employee loyalty than employer B if employer A paid $10/hr and employer B paid $5/hr, in the same industry.