Why wages differFor each of the scenarios in the following table, indicate the most likely reason for the difference in earnings.ScenarioDifferences in Human CapitalCompensating DifferentialDifferences in Natural AbilityLabour UnionsMajor-league baseball pitchers earn more than minor-league baseball pitchers. A law firm hires Simone, a recent graduate from law school, and pays her an annual wage of $40,000. It also hires Manuel, a second-year law student, and pays him an annual wage of $30,000. Simone and Manuel were born in the same country, attended the same university, and studied in the same graduate program. Two automotive technicians have the same amount of schooling and work experience, but earn different wages. The first works the day shift for an auto manufacturer factory for an annual wage of $54,000 per year, and the second works the night shift for the same company for an annual wage of $63,000 per year.

There can be various reasons for differences in earnings due to differences in efficiency or…

Answered: For each of the scenarios in the…

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter11: Profit Maximization

Section: Chapter Questions

Problem 11.8P

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Why wages differ

For each of the scenarios in the following table, indicate the most likely reason for the difference in earnings.

Scenario	Differences in Human Capital	Compensating Differential	Differences in Natural Ability	Labour Unions
Major-league baseball pitchers earn more than minor-league baseball pitchers.
A law firm hires Simone, a recent graduate from law school, and pays her an annual wage of $40,000. It also hires Manuel, a second-year law student, and pays him an annual wage of $30,000. Simone and Manuel were born in the same country, attended the same university, and studied in the same graduate program.
Two automotive technicians have the same amount of schooling and work experience, but earn different wages. The first works the day shift for an auto manufacturer factory for an annual wage of $54,000 per year, and the second works the night shift for the same company for an annual wage of $63,000 per year.

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