Suppose all workers have the same preferences represented by U = (w)2/ 2x where w is the wage and x is the risk associated to working in a risky environment. There are only two types of jobs in the economy: a low risk job (x = 1) and a high risk job (x = 2). Let wsafe be the wage paid by the safe job and wrisky be the wage paid for doing the dirty job. If the risky job pays $8 per hour, what is the compensating wage differential? Hint: Find the wage paid in the safe job. (a) $2.35 (b) $5.30 (c) $8.57 (d) $16 %3D

Suppose all workers have the same preferences represented by U = (w)2/ 2x where w is the wage and x is the risk associated to working in a risky environment. There are only two types of jobs in the economy: a low risk job (x = 1) and a high risk job (x = 2). Let wsafe be the wage paid by the safe job and wrisky be the wage paid for doing the dirty job. If the risky job pays $8 per hour, what is the compensating wage differential? Hint: Find the wage paid in the safe job. (a) $2.35 (b) $5.30 (c) $8.57 (d) $16 %3D

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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