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

If Al's indifference curve is steeper than Pete's, it means that Al requires a higher increase in wage in order to compensate for an increase in the probability of injury. This indicates a higher degree of risk aversion. Therefore, option B is the best choice.

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