When graphing a worker's indifference curves in Probability of Injury (x-axis) versus Wage (y-axis) space, Al's indifference curves are steeper than Pete's indifference curve. In this case,
A) Al is more risk loving than Pete.
B) Al requires a greater wage increase than Pete in order to willingly take on more risk.
C) Al will end up receiving a higher wage than Pete.
D) both are risk neutral.
E) Al will only accept a job if it offers no risk of injury.

Question

Quizplus · Accepted Answer

Al's steeper indifference curves indicate that he requires a greater compensation (wage increase) for an additional unit of risk compared to Pete, reflecting a higher aversion to risk, not a more risk-loving attitude. This does not necessarily mean Al will end up with a higher wage or that he is risk neutral or will only accept no-risk jobs.

When Graphing a Worker's Indifference Curves in Probability of Injury