Suppose that all workers value a 1 percent reduction in the workplace injury rate at $1,000 per year. The cost of reducing the injury rate by 1 percent is $200 per year for each worker. Firms currently pay $20,000 per year to workers, without any effort to improve safety. If new firms began to offer workers $19,500 and a 1 percent reduction in the injury rate, then the value to each worker of the new firms' offer would be ______ compared to ______ at the existing firms.
A)$19,500; $20,000
B)$20,500; $20,000
C)$19,700; $19,800
D)$20,000; $20,000

Question

Quizplus · Accepted Answer

The new firm's offer is $19,500 in wages plus a $1,000 value from the 1% reduction in injury rate, totaling $20,500, compared to the $20,000 at existing firms.

Suppose That All Workers Value a 1 Percent Reduction in the Workplace