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Labor Economics HW5

Labor Economics HW5 - 1 Emmanuel Clayton EC931657 AECO370...

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1 Emmanuel Clayton EC931657 AECO370 Masters Homework on Compensating Differentials (HW6) 1. Rosie the Riveter has the following utility function over weekly wages, w, and the probability of death due to a fall, p. (i) Draw her indifference curves for U = 100, 200, 300, 400 over the range of p from 0 to 0.2. Utilily Value (U) (c) Wage p = 0 Wage p = 0.1 Wage p = 0.2 100 2000 100 300 500 200 2000 200 400 600 300 2000 300 500 700 400 2000 400 600 800
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2 (ii) Suppose the probability of death from a fall is zero when she works on a single storey building but it increases by 0.01 for every additional floor of the building she works on. If she can get $200 per week to work on a (single storey) supermarket, how much would the builder of a 11 storey office block have to pay her? What about a 21 storey sky-scraper? Probability of Death (p) Wage ($) Floor 0 200 Ground Fl 0.01 202 1 0.02 204 2 0.03 206 3 0.04 208 4 0.05 210 5 0.06 212 6 0.07 214 7 0.08 216 8 0.09 218 9 0.1 220 10 0.11 222 11 0.12 224 12 0.13 226 13 0.14 228 14 0.15 230 15 0.16 232 16 0.17 234 17 0.18 236
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