James received two job offers. Both the companies required him to do the same work. However, Company A offered him a salary of $2,000 per month while Company B offered him a salary of $2,400. James decided to take up the first offer because Company A's office was closer to his house than Company B's office. The compensating differential that James is willing to pay in this case is _______.
A) $400
B) $2,000
C) $2,400
D) $4,400

Question

Quizplus · Accepted Answer

The compensating differential refers to the amount of money an individual is willing to forgo for non-monetary benefits. In this case, James is willing to accept $400 less per month to work closer to home, making the compensating differential $400.

James Received Two Job Offers