LABOR ECONOMICS
8th Edition
ISBN: 9781260004724
Author: BORJAS
Publisher: RENT MCG
expand_more
expand_more
format_list_bulleted
Question
Chapter 5, Problem 1RQ
To determine
Determine how the worker decides whether to accept a safe job or a risky job.
Expert Solution & Answer
Explanation of Solution
Assume that there are only two types of jobs in the labor market, the safe jobs and the risky jobs. The safe jobs have the probability that 0 employee gets injured. On the other hand, the risky jobs have the probability that 1 gets injured. Here, the indifference
Want to see more full solutions like this?
Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!
Students have asked these similar questions
State true or false with reason
casual workers are not different from regular workers.
Describe how the firm decides whether to offer a safe working environment or a risky environment.
The below graph shows the optimal asking wage. Suppose another individual with the same wage opportunities is more “future-oriented”. Show how this would alter the graph. How will this affect the asking wage and the length of the job search?
Knowledge Booster
Similar questions
- The below graph shows the optimal asking wage. Suppose another individual with the same wage opportunities is more “present-oriented”. Show how this would alter the graph. How will this affect the asking wage and the length of the job search?arrow_forwardWhat happens to the probability that a particular person works when the wage rises? Does such a wage increase generate an income effect?arrow_forwardDebbie is about to choose a career path. She has narrowed her options to two alternatives. She can become either a marine biologist or a concert pianist. Debbie lives two periods. In the first, she gets an education. In the second, she works in the labor market. If Debbie becomes a marine biologist, she will spend $15,000 on education in the first period and earn $472,000 in the second period. If she becomes a concert pianist, she will spend $40,000 on education in the first period and then earn $500,000 in the second period.a. Suppose Debbie can lend and borrow money at a 5 percent rate of interest between the two periods. Which career will she pursue? What if she can lend and borrow money at a 15 percent rate of interest? Will she choose a different option? Why?b. Suppose musical conservatories raise their tuition so that it now costs Debbie $60,000 to become a concert pianist. What career will Debbie pursue if the interest rate is 5 percent?arrow_forward
- The below graph shows the optimal asking wage. Suppose another individual with the same wage opportunities is more “future-oriented”. Adjust the graph to show the impact this will have on the asking wage and the length of his job search:arrow_forwardGerhart & Newman (2020) discuss how compensation (pay) may be a measure of justice, i.e., gender, race, culture, etc. They further state that stockholders are interested in executive pay. Why does it matter, and how is it fixed? How risky are these decisions to employee retention?arrow_forwardShow that the competitive labor market compensates workers for the probability that they will be laid off.arrow_forward
- How does skill atrophy provide an explanation for differentiation in earnings?arrow_forward2. Workers in a certain factory are facing uncertain conditions regarding their employment. With 0.5 probability they can work 1,000 hours in a year and with 0.5 probability they can work 2,500 hours. The wage rate is $10/hour. Draw the utility functions below on a graph. Mark worker's employment possibilities. Explain whether the individuals are risk averse, risk neutral, or risk lover. a. U = √Income b. U = Income c. U = Income²arrow_forwardWilson is injured on the job when a forklift tips over and falls on him. His boss knew the forklift was in disrepair and dangerous but allowed the forklift to be used. Can Wilson collect worker’s compensation benefits? Can Wilson sue his employer for negligence?arrow_forward
- Why is severance of employment relevant to youth? Explain and provide detailsarrow_forwardConsider two workers with identical preferences, Phil and Bill. Both workers have the same life cycle wage path in that they face the same wage at every age, and they know what their future wages will be. Leisure and consumption are both normal goods. a. Compare the life cycle path of hours of work between the two workers if Bill receives a one-time, unexpected inheritance at the age of 35. b. Compare the life cycle path of hours of work between the two workers if Bill had always known he would receive (and, in fact, does receive) a one-time inheritance at the age of 35.arrow_forwardMarie is about to choose a career path. She can either become a certified public accountant or a high school teacher. Marie lives two periods. In the first, she gets an education. In the second, she works in the labor market. If Marie becomes a certified public accountant, she will spend $45,000 on education in the first period and earn $500,000 in the second period. If she becomes a high school teacher, she will spend $30,000 on education in the first period and then earn $400,000 in the second period. Suppose Marie can lend and borrow money at a 5 percent rate of interest between the two periods. a) Which career will she pursue? b) What if she can lend and borrow money at a 15 percent rate of interest?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Economics (MindTap Course List)EconomicsISBN:9781337617383Author:Roger A. ArnoldPublisher:Cengage Learning
Economics (MindTap Course List)
Economics
ISBN:9781337617383
Author:Roger A. Arnold
Publisher:Cengage Learning