What is the new equilibrium wage differential

Reference no: EM131923247

Problem

Workers can choose to work in two types of jobs: a risky job and a safe job. Suppose there are 100 workers in the economy. Worker l 's reservation price (for accepting the risky job) is $1; worker 2's reservation price is $2, and so on. Because of technological reasons, there are only 10 jobs in the economy that are risky jobs. What is the equilibrium wage differential between safe and risky jobs? Which workers will be employed at the risky firm? Suppose now that an advertising campaign paid for by the employers who offer risky jobs stresses the excitement associated with "the thrill of injury," and this campaign changes the attitudes of the workforce toward being employed in a risky job. Worker 1 now has a reservation price of -$10 (that is, she is willing to pay $10 for the right to work in the risky job); worker 2's reservation price is - $9, and so on. Risky firms still want to hire only 10 workers. What is the new equilibrium wage differential? Why?

Reference no: EM131923247

Questions Cloud

Describe quantitatively the motion of the skaters : (a) Describe quantitatively the motion of the skaters after they are connected by the pole.

What in the world are you talking about : Hugo is the CEO of Hugo Enterprises. Hugo must determine whether to buy or lease a machine that is critical for production at his plant. He has asked his asset.

Radius of the equivalent hoop in the general case : Let k represent the radius of gyration and show that k = sqrt(I*M) . This gives the radius of the "equivalent hoop" in the general case.

What effect each events would have on level of interest rate : Explain what effect each of the following events would likely to have on the level of interest rates: Households dramatically increase their current consumption

What is the new equilibrium wage differential : Workers can choose to work in two types of jobs: a risky job and a safe job. What is the new equilibrium wage differential? Why?

Find the moment of inertia : Use the parallel-axis theorem to find the moment of inertia when the axis of rotation is through one end, perpendicular to the length of the rod.

Which product should have a higher level of availability : As a firm gets better at postponement (can postpone at lower cost), should it increase/leave unchanged/decrease the variety that it offers? Why?

What happens to the wage structure in the labor market : Suppose there are two job characteristics that workers care about: wages and health insurance. What happens to the wage structure in the labor market?

Understand the nature of the problem or lack thereof : Others say more research needs to be done to more fully understand the nature of the problem or lack thereof. What do you think?

User Account

All Pages