Practice Quiz

AP Microeconomics

Category - Microeconomics

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Which of the following is the correct term for the differences in wage levels that occur from job characteristics?
  1. Human capital
  2. Productivity factor
  3. Compensating differentials
  4. Equity
Explanation
Answer - C - The differences in wage levels that occur from job characteristics are compensating differentials.

Key Takeaway: The compensating differential analyzes the relationship between the wage rate and any of the unpleasant sides of doing a job (including any risks involved) the unpleasantness, risk, or other undesirable attributes of a particular job. The compensating differential is basically the additional amount of salary that must be given to a particular worker in order to do the unpleasant portions of the position.
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