One Implication of the Theory of Compensating Differentials Is That

question 15

Multiple Choice

One implication of the theory of compensating differentials is that jobs in states with high income tax rates are likely to

• A) be associated with more fringe benefits.
• B) be associated with fewer fringe benefits.
• C) pay the same wage and offer the same fringe benefits package as the same jobs in lower-tax states.
• D) have worse working conditions.
• E) be seasonal in nature.

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Definitions:

Coincidence of Wants

A situation in a barter system where two parties each have something the other wants, facilitating an exchange without the need for money.

Total Output

The total quantity of goods and services produced by an economy, sector, or individual producer over a specified period.

Coincidence-of-Wants Problem

Refers to the difficulty in barter transactions where each party needs to have what the other wants and be willing to trade for it simultaneously.

Trade by Barter

The exchange of goods or services between parties without the use of money as a medium of exchange.