Question

People who receive relatively high pay also tend to work in a relatively desirable work environment. This is probably because:

A) The differential required to compensate for high skill more than offsets the differential required for poor working conditions.
B) Well-paid and poorly paid workers are in noncompeting job markets with desirable working conditions operating off their normal isoprofit curves.
C) Employers have imperfect information.

Answer 1

People who receive high pay also tend to work in desirable work environments due to the efficiency wage theory, which states that paying employees more than market conditions dictate motivates them to work harder and stay with the current employer.

Step-by-step explanation:

The reason why people who receive relatively high pay also tend to work in a relatively desirable work environment is because of the efficiency wage theory. According to this theory, employers pay their employees more than market conditions dictate in order to motivate them to work harder and stay with the current employer. By paying higher wages, employers can avoid the cost and time of hiring and training new employees, and reap the benefits of well-motivated workers.