The theory of efficiency wages explains why a. it may be in the best interest of firms to offer wages that are above the equilibrium level. b. setting wages at the equilibrium level may increase unemployment. c. it is efficient for firms to set wages at the equilibrium level. d. the most efficient way to pay workers is to pay them according to their skills.

T-comm makes a variety of products. it is organized in two divisions, north and south. the managers for each division are paid, in part, based on the financial performance of their divisions. the south division normally sells to outside customers but, on occasion, also sells to the north division. when it does, corporate policy states that the price must be cost plus 20 percent to ensure a "fair" return to the selling division. south received an order from north for 300 units. south's planned output for the year had been 1,200 units before north's order. south's capacity is 1,500 units per year. the costs for producing those 1,200 units follow