Suppose that all workers value a safe job $2,000/year more than a risky job.The cost of safety is $700 per worker.Firms currently pay $35,000 per year to workers,without any effort to improve safety.
Suppose new firms began to offer workers $34,000 per year and safe jobs.The new firms would find that

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Quizplus · Accepted Answer

Since workers value a safe job $2,000/year more than a risky job and the cost of safety is $700 per worker, offering a safe job for $34,000 per year implies that workers would receive the same amount they currently earn, plus an additional $1,300 in value for the safety. Therefore, workers would be willing to accept this offer because they would value the job more than what they currently have, even though it pays less. Option A is incorrect because workers would still apply for jobs that offer them better working conditions. Option B is incorrect because there is no evidence to suggest that lower quality workers would apply for these jobs. Similarly, option C is incorrect because there is no evidence to suggest that injury prone workers would apply for these jobs.

Suppose That All Workers Value a Safe Job $2,000/year More