If non-monetary benefits that are costless to employers are offered workers, what will happen to the money wage and the full wage

If non-monetary benefits that are costless to employers are offered workers, what will happen to the money wage and the full wage (the money wage plus the money equivalent of the nonmonetary benefit)?

	the equilibrium money wage rate will rise, but the "full wage" will fall.
	the equilibrium money wage rate will fall, but the "full wage" will rise.
	both the equilibrium money wage rate and the "full wage" will rise.
	both the equilibrium money wage rate and the "full wage" will fall.

Solutions

Expert Solution

This should increase the demand for jobs which implies that labor supply is increased. Hence money wage would apparently decline as labor supply curve shifts right and reduces the market going wage rate. However, full wage would increase because even with a lower wage rate, the overall benefits received from the pay scheme are greater than a relatively higher wage rate.

Select second option. the equilibrium money wage rate will fall, but the "full wage" will rise

Rahul Sunny answered 1 year ago

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