If workers' compensation premiums reflected the full social cost of the injuries sustained by each employer's workers, then:
A)most firms would be forced out of business.
B)the premium would function like an optimal tax on injuries.
C)injury rates would rise.
D)firms would become less capital intensive.

Question

Quizplus · Accepted Answer

If workers' compensation premiums reflected the full social cost of the injuries sustained by each employer's workers, then the premium would function like an optimal tax on injuries. This would create a disincentive for firms to engage in unsafe practices and incentivize them to invest in safety measures to prevent injuries, ultimately leading to a reduction in injury rates. While some firms may struggle initially to adjust to the new premiums, the long-term benefits of improved workplace safety would outweigh the costs.

If Workers' Compensation Premiums Reflected the Full Social Cost of the Injuries