Principles of Microeconomics, 7th Edition

Published by South-Western College
ISBN 10: 128516590X
ISBN 13: 978-1-28516-590-5

Chapter 19 - Part VI - Earnings and Discrimination - Quick Check Multiple Choice - Page 410: 3

Answer

d. efficiency wages

Work Step by Step

Efficiency compensation is the idea of understanding the wage disparities why certain firms pay higher salaries (read as above-equilibrium compensation) in order to increase the efficiency of workers and the standard of workmanship. In this case, Fred offers his workers double what other companies do in order to retain them and also to increase productivity.
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