assignment 7.pdf - Part I 3 a The equilibrium wage...

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Part I 3) a. The equilibrium wage differential is $10 and 10 workers will be employed at the risky firm. b. The new equilibrium wage differential is -$1. 4) U is 4 so the wage for the dirty job is $36. The compensating wage differential is $20. 5) The engineering advances shifts the demand curve to the left since the difference between the safe and risky job decreased. Therefore, the wage differential will decrease as well as the number of workers in the risky job (E’’) . On the other hand, the incentive of the action serial shifts the supply curve to the right. Therefore, the wage differential will decrease while the number of workers in the risky job increase (E’’) . Since one explanation increases the number of risky job workers and the other decreases it, the correct one can be determined with the help of the information on the number of workers employed in the risky job. Part II 1) (i) Fishing is an aggreable job since it is clean and not so hard, it is even considered a hobby
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