Efficiency Wage Theory Suggests That Firms May Hold Wages Above

question 274

Multiple Choice

Efficiency wage theory suggests that firms may hold wages above the market clearing rate because

• A) they believe that the productivity of workers increases with the wage rate.
• B) unspoken agreements between workers and firms are in place.
• C) it is required by law that they do so.
• D) long-term contracts fix wage rates for a period of one to three years.

---

Definitions:

Achievement Drive

A personal motivation to set and accomplish challenging goals, regardless of obstacles or difficulties.

Tenacity

The quality of being determined and persistent in achieving goals, despite facing difficulties or setbacks.

New Program

Initiative or set of organized activities introduced to meet certain objectives or address specific needs.

Era of Downsizing

A period characterized by a significant reduction in the workforce of organizations to cut costs and improve efficiency.