Efficiency wages are wages above the equilibrium wage that firms voluntarily pay workers. Why do firms pay e?

Question

I. Paying efficiency wages reduces worker turnover.

II. Paying efficiency wages motivates employees to work harder.

III. Paying efficiency wages helps workers to be healthier in some developing countries.

IV. Paying efficiency wages reduces the number of job applicants.

A. I and II only

B. II and IV only

C. I, II, and III only

D. I, II, III, and IV

Answer 1

I'm not bothering to take your test, but

what you call efficiency wages are probably otherwise called bonus for efficiency, paid above the hourly rate.  

They are paid to workers who produce more per hour, as a reward for workers extra effort & as incentive to continue higher production.

So the worker makes more, the company makes more, and the consumer may benefit from a lower price.

Answer 2

C.

IV is the only false statement.  Wages above subsistence would causes an increased number in applicants (ppl will want that job!)