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Olivia is considering working a secretary job for a small law firm. Given the opportunity costs of working the job, she will not accept a wage less than $12 per hour. Which of the following is likely to raise Olivia's reservation wage?(1 point)

Responses

Olivia takes on more debt and is struggling to make payments on time.
Olivia takes on more debt and is struggling to make payments on time.

Olivia learns that the job is more challenging than she initially thought.
Olivia learns that the job is more challenging than she initially thought.

Olivia learns that employees are paid bonuses at the end of every month.
Olivia learns that employees are paid bonuses at the end of every month.

Olivia has spent all of her savings and is struggling to pay rent.

1 answer

To determine which scenario is likely to raise Olivia's reservation wage, we need to consider how each situation affects her valuation of the job.

  1. Olivia takes on more debt and is struggling to make payments on time. - This situation might increase her need for higher wages to cover her debts, potentially raising her reservation wage.

  2. Olivia learns that the job is more challenging than she initially thought. - If the job is perceived as more challenging, she may demand higher compensation for taking on extra responsibilities, which could raise her reservation wage.

  3. Olivia learns that employees are paid bonuses at the end of every month. - While bonuses can be attractive, they do not directly affect Olivia's perception of the minimum wage she would accept. In fact, the knowledge of bonuses may reduce her reservation wage since it adds extra financial incentive.

  4. Olivia has spent all of her savings and is struggling to pay rent. - Similar to taking on more debt, this situation may compel her to seek a higher wage to meet her immediate financial needs, thereby raising her reservation wage.

Among these options, both "Olivia takes on more debt and is struggling to make payments on time" and "Olivia has spent all of her savings and is struggling to pay rent" are likely to raise her reservation wage due to increased financial pressure. However, "Olivia learns that the job is more challenging than she initially thought" could also raise her reservation wage due to perceived job difficulty.

Ultimately, the most direct factors raising her wage would be financial struggles, so "Olivia takes on more debt and is struggling to make payments on time" and "Olivia has spent all of her savings and is struggling to pay rent" are most likely to increase her reservation wage.