A standard efficiency wage model pays workers higher wages in order to increase worker efficiency. As...

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. In this model, if the firm's cost of monitoring effort falls,

	A.	the firm will increase its number of factory managers.
	B.	the number of shirking workers will fall.
	C.	the efficiency wage will fall.
	D.	firm profits will fall.
	E.	the pool of involuntarily unemployed workers will increase.

Expert Solution

C. the efficiency wage will fall.

(If the firm's cost of monitoring effort falls, then the efficiency wage paid by them will fall because of a large pool of involuntarily unemployed workers.)

Rahul Sunny answered 2 years ago

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