Which of the following is an example of a reason why firms might pay efficiency wages?

Question

a. At equilibrium wages, workers often quit to find better jobs.
b. At equilibrium wages, workers sleep when the boss is not looking because workers are not deeply concerned about being fired.
c. At equilibrium wages, only minimally qualified workers apply for the job.
d. At equilibrium wages, workers cannot afford a healthy diet so they fall asleep at work due to a lack of energy.
e. All of the above are true.

Answer 1

Firms might pay efficiency wages for a variety of reasons, and the options you've listed provide different rationales for this practice. Let's analyze each option:

a. At equilibrium wages, workers often quit to find better jobs.

• This is a valid point; paying higher wages can reduce turnover and incentivize workers to stay.

b. At equilibrium wages, workers sleep when the boss is not looking because workers are not deeply concerned about being fired.

• This suggests that higher wages could improve worker motivation and reduce shirking.

c. At equilibrium wages, only minimally qualified workers apply for the job.

• Offering higher wages can attract a more qualified pool of applicants.

d. At equilibrium wages, workers cannot afford a healthy diet so they fall asleep at work due to a lack of energy.

• Paying higher wages can help improve workers' living conditions, leading to better health and productivity.

Considering that each of these options presents a reason why firms might pay efficiency wages, the correct answer is:

e. All of the above are true.