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Economics (MindTap Course List)

13th Edition
Roger A. Arnold
ISBN: 9781337617383

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BuyFindarrow_forward

Economics (MindTap Course List)

13th Edition
Roger A. Arnold
ISBN: 9781337617383
Textbook Problem

According to some economists, why might business firms pay wage rates above market-clearing levels?

To determine

The reason behind firms paying wages above the market clearing levels.

Explanation

A market is a place where the goods and services are bought and sold between the sellers and the buyers at a mutually agreed price level. The market for the labor is known as the labor market and usually, the labor market is cleared at the market wage rate. This market wage rate is determined at the intersection of the market demand and supply of the labors.

However, there are firms that pay a wage rate above this market clearing wage rate and this is due to the analysis of the efficiency of the workers, and the wage rate thus determined is known as the efficiency wage rate...

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