If the Cost of Monitoring Worker Effort Is High, Then

question 48

Multiple Choice

If the cost of monitoring worker effort is high, then a firm can encourage workers to work hard by paying an efficiency wage because

• A)paying an efficiency wage means a firm can monitor its workers more cheaply.
• B)the efficiency wage will encourage workers to monitor each other's effort and report shirking to the employer.
• C)efficiency wages guarantee efficiency.
• D)the efficiency wage will raise the cost to workers of losing their jobs, even though there may be a low risk of being dismissed for shirking.