If all firms pay an efficiency wage, then
A) there is no cost to shirking because the shirking worker can receive his high wage at another firm after being caught and fired.
B) the macroeconomy would enjoy a prolonged period of near-zero unemployment.
C) there is a cost to shirking because the efficiency wage is less than it would have been if only a few firms paid it.
D) there is a cost to shirking because the shirking worker will spend a greater time unemployed after being caught and fired.
Question 2
If an additional dollar spent on monitoring would reduce shirking by 10 minutes, then the firm will increase the worker's wage by 1 if this caused
A) shirking to increase by less than 10 minutes.
B) shirking to decrease by more than 10 minutes.
C) shirking to decrease by less than 10 minutes.
D) monitoring to become unnecessary.
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