Gold mining is very dangerous and firms often buy specialized safety equipment to make the job safer. The first graph shows the labor market for gold miners and the second graph shows the marginal cost (MC) for the firm for safety equipment. For each unit of safety equipment that the firm buys, they can reduce the premium they pay to their laborers by 10% of the wage in the labor market. 1. Show the effect of an increase in worker productivity by shifting the appropriate curve in the first graph. 2. In the second graph, show the effect of the change in gold miner wages on the marginal benefit of the safety equipment by placing the two marginal benefit (MB) curves appropriately.

Gold mining is very dangerous and firms often buy specialized safety equipment to make the job safer. The first graph shows the labor market for gold miners and the second graph shows the marginal cost (MC) for the firm for safety equipment. For each unit of safety equipment that the firm buys, they can reduce the premium they pay to their laborers by 10% of the wage in the labor market. 1. Show the effect of an increase in worker productivity by shifting the appropriate curve in the first graph. 2. In the second graph, show the effect of the change in gold miner wages on the marginal benefit of the safety equipment by placing the two marginal benefit (MB) curves appropriately.

Microeconomics: Principles & Policy

14th Edition

ISBN:9781337794992

Author:William J. Baumol, Alan S. Blinder, John L. Solow

Publisher:William J. Baumol, Alan S. Blinder, John L. Solow

Chapter22: Contemporary Issues In The U.s. Economy

Section: Chapter Questions

Problem 5DQ

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How much safety equipment will be purchased before the
increase in productivity?
How much safety equipment will be purchased after the
increase in productivity?
safety equipment:
safety equipment:
units
units .

Gold mining is very dangerous and firms often buy specialized safety equipment to make the job safer. The first graph shows the
labor market for gold miners and the second graph shows the marginal cost (MC) for the firm for safety equipment. For each unit
of safety equipment that the firm buys, they can reduce the premium they pay to their laborers by 10% of the wage in the
labor market.
1. Show the effect of an increase in worker productivity by shifting the appropriate curve in the first graph.
2. In the second graph, show the effect of the change in gold miner wages on the marginal benefit of the safety equipment by
placing the two marginal benefit (MB) curves appropriately.
Wage (5)
88 22889RR2.
100
90
80
10
Supply
Demand
100 200 300 400 500 600 700 800 900 1,000
Quantity of labor
Cost or benefit (5)
10
9
a
2
1
0
MB before
2
MB after
3 4 5 6
Quantity of safety equipment
8
MC

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