Pat currently earns $4,250 per month. He is willing to work in a night shift if his employer pays him $500 more than what he gets for the day shift. This implies that Pat's compensating differential in this case is ________.
A) $500
B) $3,750
C) $4,750
D) $5,000

Question

Quizplus · Accepted Answer

The compensating differential refers to the additional amount of income that a worker requires to be indifferent between two jobs that have different characteristics, such as night shift versus day shift. In this case, Pat requires an additional $500 to work the night shift, making the compensating differential $500.

Pat Currently Earns $4,250 Per Month