If a worker is indifferent between a job with a wage of $10 per hour and a job with a wage of $12 per hour, then the
A)higher-paying job has a compensating wage differential of $2 per hour.
B)higher-paying job has a compensating wage differential of $12 per hour.
C)higher-paying job is intrinsically more attractive than the lower-paying job.
D)wage in the higher-paying job must eventually fall due to competition.

Question

Quizplus · Accepted Answer

The fact that the worker is indifferent between the two jobs means that they perceive the non-monetary factors (such as work environment, job security, etc.) to be worth $2 per hour. This is known as a compensating wage differential.

If a Worker Is Indifferent Between a Job with a Wage