Sam and Bob have the same educational background.Both have been policemen in Memphis for 10 years.Sam works from 11 P.M.until 7 A.M. ,and Bob works from 7 A.M.until 3 P.M.Sam's salary is $800 per month higher than Bob's salary.This example illustrates a wage disparity due to:
A)efficiency wages.
B)market power.
C)compensating differentials.
D)discrimination.

Question

Quizplus · Accepted Answer

The wage disparity between Sam and Bob is due to compensating differentials. Sam's shift from 11 P.M. until 7 A.M. is considered less desirable than Bob's shift from 7 A.M. until 3 P.M. as it is outside of normal working hours, leading to Sam being paid $800 more per month to compensate for the undesirable shift. Discrimination, efficiency wages, and market power are not relevant factors in this scenario.

Sam and Bob Have the Same Educational Background