Why people get paid differing wages

1. (2 points) Why do people get paid differing wages? What compensating differentials may occur? Give examples.
2. (2 points) How do unions change the labor market? Give the pros and cons of unions. Do you think they are necessary? Why or why not? Remember to consider unions in conjunction with monopsonies.
3. (4 points) Watch the following videos: Wealth inequality in motion and How inequality hurts countries. What causes wealth and income inequality? Do you think it is a problem in our current economy? What, if anything should be done about inequality?
4. (2 points) When would a firm pay higher than equilibrium wages? What might cause a firm to make this decision? What is this wage called?

Sample Solution