Wage differences that can't be explained by the number of years of training could result from
A) demand but not supply.
B) supply but not demand.
C) compensating differentials.
D) the marginal product of capital.

Question

Quizplus · Accepted Answer

Compensating differentials are wage differences that exist to compensate for differences in working conditions or job characteristics, such as the riskiness or unpleasantness of the work. These differences are unrelated to the amount of education and training an individual has received. Therefore, they could explain wage differences that can't be explained by the number of years of training. A and B are incorrect because wage differences are determined by both supply and demand factors. D is incorrect because the marginal product of capital refers to the increase in output resulting from an additional unit of capital, not wage differences.

Wage Differences That Can't Be Explained by the Number of Years