Anna and Bob are workers in two different industries. Anna's industry has a relatively lower supply of workers than Bob's for a given demand for workers. If Bob's wage is $12 per hour and the compensating wage differential is $2 per hour, then Anna's wage is _____ per hour.
A) $7
B) $10
C) $14
D) $24

Question

Quizplus · Accepted Answer

Anna's industry has a lower supply of workers, which typically means wages would be higher due to the scarcity of labor. The compensating wage differential of $2 suggests that, all else being equal, Anna's job might have less desirable attributes (e.g., higher risk, less pleasant conditions) that require additional compensation to attract workers. Therefore, Anna's wage would be Bob's wage plus the compensating differential: $12 + $2 = $14 per hour.

Anna and Bob Are Workers in Two Different Industries