A Standard Efficiency Wage Model Pays Workers Higher Wages in Order

A standard efficiency wage model pays workers higher wages in order to increase worker efficiency. As a result, firm profits increase and there is a pool of involuntarily unemployed workers. This equilibrium comes about in part because

A) the firm pays workers according to a tournament.
B) workers are less likely to shirk when there is a pool of unemployed workers who are willing to take their job.
C) the firm agrees to not replace labor with capital.
D) workers are unaware of the pool of unemployed workers as long as they keep their job.
E) workers will do anything to be paid a higher wage.

Correct Answer:

Verified

Unlock this answer now
Get Access to more Verified Answers free of charge

Sign up to view answer