Scenario 14.1
A worker in Firm A earns an income of $5,000 per month. He has been offered a job in Firm B where he will be paid a salary of $7,000 per month.
-Transfer earning is the minimum amount that has to be paid to a factor to allocate it in its next best alternative use.

Question

Quizplus · Accepted Answer

Transfer earning refers to the minimum amount that a factor of production (such as labor) must be paid in order to retain it in its current use or to allocate it to its next best alternative use. In this scenario, the worker's transfer earnings would be $5,000 per month, as this is the minimum amount he would need to be paid to remain with Firm A.

Scenario 14.1 A Worker in Firm a Earns an Income of $5,000