Compensating Wage Differentials

question 127

Multiple Choice

Compensating wage differentials

• A) refer to the wage premium given to domestic-born workers.
• B) refer to the wage premium necessary to attract illegal immigrant workers.
• C) discourage illegal immigrants from entering low-wage labor markets.
• D) will attract U.S. workers to undesirable jobs if the differential over less unpleasant work is sufficiently high.

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Definitions:

Moral Hazard

A situation in which one party is more likely to take risks because the negative consequences of the risk will be borne by another party.

Buying Insurance

The process of obtaining a policy from an insurance company to protect against financial losses from specified risks, in exchange for a premium.

Adverse Selection

A situation in financial markets where buyers and sellers have different information, leading to transactions that favor the party with more information.

Good Drivers

Good drivers refer to individuals who operate vehicles safely, adhering to traffic laws and regulations, and minimizing the risk of accidents.