Question: Define efficiency wage. What assumption about worker behavior underlies the efficiency wage theory? Why does it predict that the real wage will remain rigid even

Define efficiency wage. What assumption about worker behavior underlies the efficiency wage theory? Why does it predict that the real wage will remain rigid even if there is an excess supply of labor?

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An efficiency wage is a wage paid by a firm that is higher than the marketclearing wage which is the wage that would be determined by the equilibrium ... View full answer

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