Which of the following comparisons best illustrates a compensating differential?
A)Sydney's wage is higher than Caleb's because the value of Sydney's marginal product is higher than Caleb's.
B)Helena's wage is higher than Cameron's because Helena is very personable, and Cameron is very gruff.
C)Sofia's wage is higher than Amari's because Sofia's job may cause long-term health problems, and Amari's job will not impair his health.
D)Damaris's wage is higher than Dontrell's because Damaris obtained a college degree, whereas Dontrell decided to start working after high school.

Question

Quizplus · Accepted Answer

A compensating differential refers to the higher wage paid to compensate for the negative aspects of a job, such as health risks or undesirable conditions. Sofia's higher wage compensates for the potential long-term health problems associated with her job, making it the best illustration of a compensating differential.

Which of the Following Comparisons Best Illustrates a Compensating Differential