Chapter 13R, Problem 23MCQ

To determine

The correct option that defines reason for reducing wage inequality in the labor market.

Answer to Problem 23MCQ

Option d is correct.

Explanation of Solution

Explanation for correct option:

d.

Wage inequality can be reduced if opportunity is provided to the poor class people. This is because people with higher education and skills are provided better wages and work. Therefore, option d is correct.

Explanation for incorrect options:

a.

As per marginal productivity theory of income distribution, there are various reasons for wages inequality such as compensating differentials, education, skills, talent, training, etc. If discrimination is increased then wage inequality will also increase. Therefore, option a is incorrect.

b.

Increase in compensating differential will increase wage inequality instead of minimizing it because wages paid to different workers will be different. Therefore, option b is incorrect.

c.

Increase in wage efficiency will increase wage inequality as employer will pay high to the workers taking special care of their work. Therefore, option c is incorrect.

e.

If wages will paid according to the marginal product or the marginal output produced by them then they will be paid higher which will create wage inequality. Therefore, option e is incorrect.

Economics Concept Introduction

Factor of production: Factor of production refers to the components or the resources that are required for producing intangible or tangible products.

Compensating differentials: As per marginal productivity theory, wages are paid to the workers as per the type of job due to which wages are different for different workers.