What wage would the worker now need to earn in the a job

Reference no: EM13218312

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/r^2 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 become A jobs). What wage would the worker now need to earn in the A job to be equally happy following the regulation?

Reference no: EM13218312

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