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Wages question?

Which of the following is a reason an employer in a perfectly competitive market might pay a wage that is greater than the market wage?

I. The employer's workforce is unionized.

II. Employees that are paid higher wages work harder because they don't want to lose their jobs.

III. Employees that are paid higher wages are less likely to leave, so high wages can reduce worker turnover.


A. III only

B. I, II, and III

C. I only

D. I and II only

B

The goal of unions is to maximize the firm's wage bill.
II and III are related; since they know they can be easily replaced if their performance is not satisfactory workers being paid efficiency wages will work hard to keep that job. As a result turnover is reduced which reduces costs.

C.
I've known some companies that do pay a higher wage, and that doesn't make the workers any better.

B. Henery Ford did it specifically for reason III

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