The reservation wage
A) is the wage paid to the reserve army of the unemployed.
B) cannot be higher than the employment insurance benefit.
C) should be the same as the employment insurance benefit, if employment insurance is to be efficient.
D) is the wage at which an unemployed worker is just indifferent to accepting a job and turning it down.
E) is the wage paid in the government sector.

Question

Quizplus · Accepted Answer

The reservation wage is the wage level at which an unemployed worker is just indifferent to accepting a job offer or turning it down. It is the minimum wage that a person is willing to accept in order to re-enter the workforce. It is influenced by a variety of factors including personal financial needs, the availability of alternative employment opportunities, and job characteristics.

The Reservation Wage