Efficiency wages a. increase productivity and reduce unemployment. b. increase productivity but increase unemployment. c. decrease productivity but reduce unemployment. d. decrease productivity and increase unemployment.

The correct answer is "B. increase productivity but increase unemployment.".

Explanation: Efficiency salaries is a theory that says that some companies voluntarily offer salaries above the equilibrium level and this results in an increase in the productivity of their workers. As a negative issue, they can cause higher unemployment rates, since with salaries above the equilibrium salary, there is a consumer surplus. In addition, it would reduce the demand for more workers, as they have become more expensive.