A restaurant pays each waiter a salary and allows no tipping. The opportunity wage of good waiters (wg) is greater than the opportunity wage of bad waiters (wb). If the restaurant sets its salary between wb and wg , then it will attract only bad waiters.

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Quizplus · Accepted Answer

Since the salary is set between the opportunity wage of good waiters (wg) and bad waiters (wb), it is less attractive to good waiters who can earn more elsewhere (wg), but attractive to bad waiters whose opportunity wage (wb) is lower. Therefore, only bad waiters would be attracted to work at the restaurant.

A Restaurant Pays Each Waiter a Salary and Allows No