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 total cost of hiring a worker to the existing firms is __________ and to the new firms it is __________.

Question

Quizplus · Accepted Answer

The existing firm does not offer safe jobs and pays $35,000 per year to its workers. The cost of safety is $700, so the total cost of hiring a worker to the existing firm would be $35,700 per year.

New firms offer safe jobs and pay $34,000 per year to workers. All workers value safe jobs $2,000/year more than risky jobs, so the cost of safety is $700 per worker. Thus, the total cost of hiring a worker to the new firms would be $34,700 per year.

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