Concept: Compensating Differentials 1 Question Help * Suppose workers have the o

Question

Concept: Compensating Differentials 1 Question Help * Suppose workers have the option of working in a dangerous factory or a safe factory. Both jobs require the same productive characteristics, such as education and training According to compensating differentials, would a law mandating an improvement in safety for the dangerous factory make workers in that factory better off? Given compensating differentials, the safety law A. would not necessarily make workers in the dangerous factory better off because it would lo ver their wages B. would make workers in the dangerous factory better off by increasing their marginal product. C. would not necessarily make workers in the dangerous factory better off because it would raise the price of the product they produce. D. would make workers in the dangerous factory better off by reducing risk O E. would make workers in the dangerous factory better off because they otherwise accurately estimate the true risk of their job.

Explanation / Answer

Ans

Option A

would not necessarily make workers in the dangerous factory better off because it would lower their wages.

compensating differential are the additional wages paid to the workers to compensate for unpleasant aspects of a job.Hence a law for improvement in safety will lower their wages.

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