The market wage rate for a car mechanic is $30 per week.Peter, who owns a garage, is in urgent need of a mechanic to head his existing employees.He is willing to hire Alex and pay $8 extra in order to make sure that Alex puts in his best efforts.If Alex accepts the job, which of the following statements will be true?

Question

Quizplus · Accepted Answer

If Alex accepts the job, he will be receiving a wage of $38 per week ($30 + $8 extra). As this wage rate is above the market wage rate, there is a possibility that Alex may not experience any disutility of hard work (option A). However, it cannot be concluded for sure.

Option B is incorrect because Peter's willingness to pay extra $8 implies that Alex has an incentive to put in his best efforts on this job.

Option D is also incorrect because Peter's benefit from hiring Alex may be higher than the extra $8 he is paying, depending on the productivity of Alex's additional efforts.

Therefore, option C is the correct answer. If Alex accepts the job, it implies that the disutility of extra effort in this new job is less than the utility from extra pay.

The Market Wage Rate for a Car Mechanic Is $30