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Category - Economics

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The theory of efficiency wages states that workers and companies perform more efficiently when wages are ____________.
  1. inflation-adjusted
  2. above equilibrium
  3. government legislated
  4. union-supported
Explanation
Answer: B - The theory of efficiency wages states that workers and companies perform more efficiently when wages are above equilibrium.

Key Takeaway: The theory of efficiency wages holds that worker productivity increases when they are paid wages above equilibrium. These wages are considered incentives for higher productivity and more efficient processes.
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