A firm has two plants, one located in desirable Scenic Springs and the other located in the undesirable Swamp Lands. If the workers in Scenic Springs are paid $50,000 a year and the workers in Swamp Land are paid $60,000, which of the following is true?

Question

Quizplus · Accepted Answer

The $10,000 difference in salaries between the two plants is the compensating wage differential. This means that the firm is compensating the workers in the undesirable location (Swamp Lands) with a higher salary to make up for the negative aspects of working there, such as unfavorable working conditions or a less desirable living environment. It is not a worker equity payment, as this term refers to compensation that is tied to a worker's skills or experience, rather than the location of their workplace.

A Firm Has Two Plants, One Located in Desirable Scenic