Suppose That a Company Hires Recent College Graduates for Two

question 217

Multiple Choice

Suppose that a company hires recent college graduates for two types of jobs, sales people and credit analysts. The hours worked and skill levels are the same for both positions. The sales people get to travel to several desirable locations, whereas the credit analysts do not leave the home office. When comparing the salaries of the two positions, it is likely that the company pays the

• A)sales people less as a compensating differential.
• B)credit analysts less as a compensating differential.
• C)same salary for both positions because they require the same skill level.
• D)same salary for both positions because it would be illegal to do otherwise.

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Definitions:

Perfectly Price-Discriminating

A theoretical market condition where a seller charges each buyer their maximum willingness to pay, capturing all possible consumer surplus.

Socially Optimal Level

The point of balance where the social benefits of an economic activity equal its social costs, maximizing overall welfare.

Perfectly Price Discriminate

A pricing strategy where a seller charges the maximum price that each individual consumer is willing to pay, thus capturing all possible consumer surplus.

Deadweight Losses

Economic inefficiencies that occur when the allocation of resources is not optimal, resulting from distortions in the market such as taxes, subsidies, or monopolies.