Question

Efficiency wages may cause a _____ of labor because they _____ the equilibrium wage.

Answer 1

Efficiency wages may cause a surplus of labor because they are above the equilibrium wage.

The efficiency wage is higher than the equilibrium wage, which might result in a labor supply.

Since the efficiency wage in question is higher than equilibrium wages, there will be a labor surplus since more individuals will be eager to work as a result of the wage rise. Due to the fact that supply is more than demand, this will result in a rise in supply and an excess of labor.

There is a labor surplus in the sense that a sizeable segment of the work force produces less than it consumes and its marginal product is below the wage agreed upon via negotiation.

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