When talking about compensating wage differentials,we relax our earlier assumption of
A) utility maximization by workers.
B) profit maximization by firms.
C) income maximization by workers.
D) identical non-pecuniary benefits.

Question

Quizplus · Accepted Answer

Compensating wage differentials arise from differences in non-pecuniary benefits, such as job amenities, job security, and risk of injury or illness. This means that we cannot assume that all workers receive the same non-pecuniary benefits, which rules out option D. Options A and C are not relevant, as compensation differentials arise due to non-pecuniary benefits, not utility or income maximization. Option B is also not relevant, as it assumes that firms are profit maximizing, which may not always be the case.

When Talking About Compensating Wage Differentials,we Relax Our Earlier Assumption