Question

Suppose there are 100 workers in the economy in which all workers must choose to work a risky or a safe job. Worker 1's reservation 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 risky jobs.

A. What is the equilibrium wage differential between safe and risky jobs? Which workers will be employed at the risky firm?

B. 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 work force toward being employed in a risky job. Worker 1 has a reservation price of -$10 (that is, she is willing to pay $10 for the right to work in a risky job); worker 2's reservation price is -$9, and so on. There are still only 10 risky jobs. What is the new equilibrium wage differential?

C. Show a supply and demand for risky jobs diagram to represent the situations in question a and b.

Answer 1

The solution is explained in the explanation section below

Step-by-step explanation:

Solution:

(a) In the economy there exist 100 workers. the wage of reservation to take risky job for worker 1 is $1 and $2 for worker -2. only 10 jobs is seen as risky.

The curve of supply is shown as upward which starts from 1, because the price of reservation for the first worker is 1 and 2 is for the second worker and it keeps going on like that.

The demand curve is seen as elastic in a perfect form, due to the fact that there are only 10 risky jobs.

The 10th worker price is $10, because is wage differential is $10

(b) The worker's altitude towards taking risky jobs has changed, because of the advertisement. the wage reservation is -10$ for the first worker and -$9 for the second worker.

Th jobs seen as risky is available are only 10

However, as a result of the campaign advertisement, the curve of supply moves down and the market equilibrium gets is gotten when the wage differential is -$1. most people on the daily basis dislike risk, but the market determines those risky jobs that will pay less than the safe ones.