Consider a competitive economy that has four different jobs that vary by their wage and risk level. The table below describes each of the four jobs.Job Risk ( r ) Wage ( w)A 1/5 $ 3B 1/4 $12C 1/3 $23D 1/2 $25All workers are equally productive, but workers vary in their preferences. Consider a worker who values his wage and the risk level according to the following utility function:u(w, r) = w + 1/r2Where does the worker choose to work? Suppose the government regulated the workplace and required all jobs to have a risk factor of 1/5 (that is, all jobs must become A jobs). What wage would the worker now need to earn in the A job to be equally happy following the regulation?
Consider a competitive economy that has four different jobs that vary by their wage and risk level. The table below describes each of the four jobs.
Job Risk ( r ) Wage ( w)
A 1/5 $ 3
B 1/4 $12
C 1/3 $23
D 1/2 $25
All workers are equally productive, but workers vary in their preferences. Consider a worker who values his wage and the risk level according to the following utility function:
u(w, r) = w + 1/r2
Where does the worker choose to work? Suppose the government regulated the workplace and required all jobs to have a risk factor of 1/5 (that is, all jobs must become A jobs). What wage would the worker now need to earn in the A job to be equally happy following the regulation?
![](/static/compass_v2/shared-icons/check-mark.png)
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
![Blurred answer](/static/compass_v2/solution-images/blurred-answer.jpg)
![ENGR.ECONOMIC ANALYSIS](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9780190931919/9780190931919_smallCoverImage.gif)
![Principles of Economics (12th Edition)](https://www.bartleby.com/isbn_cover_images/9780134078779/9780134078779_smallCoverImage.gif)
![Engineering Economy (17th Edition)](https://www.bartleby.com/isbn_cover_images/9780134870069/9780134870069_smallCoverImage.gif)
![ENGR.ECONOMIC ANALYSIS](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9780190931919/9780190931919_smallCoverImage.gif)
![Principles of Economics (12th Edition)](https://www.bartleby.com/isbn_cover_images/9780134078779/9780134078779_smallCoverImage.gif)
![Engineering Economy (17th Edition)](https://www.bartleby.com/isbn_cover_images/9780134870069/9780134870069_smallCoverImage.gif)
![Principles of Economics (MindTap Course List)](https://www.bartleby.com/isbn_cover_images/9781305585126/9781305585126_smallCoverImage.gif)
![Managerial Economics: A Problem Solving Approach](https://www.bartleby.com/isbn_cover_images/9781337106665/9781337106665_smallCoverImage.gif)
![Managerial Economics & Business Strategy (Mcgraw-…](https://www.bartleby.com/isbn_cover_images/9781259290619/9781259290619_smallCoverImage.gif)