homework_5_compensating_wage_differentials -...

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University of California, Davis Dr. Janine L.F. Wilson Department of Economics Summer Session II 2009 Economics 151a Homework 5 Compensating Wage Differentials 1. There is a mythical town in the United States called Dirkville where 100,000 people live and there are no visitors or out-of-town guests. The average salary for the people of Dirkville is $50,000. a. An intersection on a busy street in a town called Dirkville is governed by stop signs for the traffic coming from two of the four directions. Each year, 2 of the 100,000 people that live in Dirkville are killed as a result of accidents in the intersection. Studies have shown that if a stoplight was installed in the intersection the death rate would fall to 1 in 100,000 people that live in Dirkville. Installing the stoplight would cost each citizen of Dirkville 1% of their salary in time lost and maintenance. What would be the minimum statistical value of a life in Dirkville have to be if the city government chose to put in a stoplight? 2.
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This note was uploaded on 11/02/2009 for the course ECON 151A taught by Professor Miller during the Summer '06 term at UC Davis.

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homework_5_compensating_wage_differentials -...

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