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Borjas Problems 5.1, 5.4, 5.65-1. Politicians who support the green movement often argue that it is profitable for firms to pursue a strategy that is “environmentally friendly” (for example, by building factories that do notpollute and are not noisy), because workers will be willing to work in environmentally friendly factories at a lower wage rate. Evaluate the validity of this claim.
If it were more profitable to be green, why wouldn’t firms be doing it in the first place?5-4. Suppose all workers have the same preferences represented by Uwx ,2where wis the wage and xis the proportion of the firm’s air that is composed of toxic pollutants. There are only two types of jobs in the economy, a clean job (x= 0) and a dirty job (x = 1). Let wbe the wage paid by the clean job and w1be the wage paid for doing the dirty job. If the clean job pays $16 per hour, what is the wage in dirty jobs? What is the compensating wage differential?0w
5-6. 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.JobRisk ( r)Wage ( wA1/5$3B1/4$12C1/3$23D1/2$25All workers are equally productive, but workers vary in their preferences. Consider a worker whovalues his wage and the risk level according to the following utility function:uwrwr(,)12.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?Calculate the utility level for each job by using the wage and the risk level: )