Suppose all workers have the same preferences represented byU = √w - 2xwhere w is the wage and x is the proportion of the firm’s air that is composed of toxic pollutants. There are only two types of jobs in the economy: a clean job ( x = 0) and a dirty job ( x =1). Let w0 be the wage paid by the clean job and w1 be the wage paid for doing the dirty job. If the clean job pays $16 per hour, what is the wage in dirty jobs?What is the compensating wage differential?

Suppose all workers have the same preferences represented byU = √w - 2xwhere w is the wage and x is the proportion of the firm’s air that is composed of toxic pollutants. There are only two types of jobs in the economy: a clean job ( x = 0) and a dirty job ( x =1). Let w0 be the wage paid by the clean job and w1 be the wage paid for doing the dirty job. If the clean job pays $16 per hour, what is the wage in dirty jobs?What is the compensating wage differential?

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter17: Income, Poverty, And Health Care

Section: Chapter Questions

Problem 11P

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