In the standard theory of compensating differentials, a worker's reservation price is the
A) amount of money it takes to entice the worker into accepting a risky job.
B) amount of money it costs a worker to take a risky job.
C) amount of money a worker loses for not taking any job.
D) amount of money it costs a worker to take a safe job.
E) difference between the wage paid in firms offering risky jobs and the wage paid by firms offering safe jobs.

Question

Quizplus · Accepted Answer

The reservation price in the context of compensating differentials refers to the minimum amount of money required to entice a worker into accepting a job that is less desirable in some way, such as being risky. This concept is fundamental in labor economics, explaining how wages adjust to compensate for job attributes like risk, required effort, or undesirable locations.

In the Standard Theory of Compensating Differentials, a Worker's Reservation