2. (8 Points) Risky Business Let the utility of Type- workers be given by U. = U.(p, W), where p is fatality risk and W is the wage, i = A, B. All workers prefer lower risk and higher wages but Type A workers are less averse to risk than are Type B. There are also two types of firms. All firms maximize profits, which are also a function of risk and wages, II = II(p, W), with profits being higher at higher risk and lower wages, but Type-1 firms find it more expensive to implement safety on the job than do Type-2 firms. The equilibrium in the economy is depicted in the attached Figure 1. a) (4 Points) Label Figure 1. In particular, identify the indifference curves of each type of worker, and identify the isoprofit curves of each type of firm, being sure to explain briefly how you know which curves are indifference curves and which curves are isoprofit curves, and which which indifference curve or isoprofit curve belongs to each type of worker and which type of firm. b) (4 Points) Identify on the diagram the equilibrium wages and risk levels at each type of firm and for each type of worker. Explain how you know that these are the equilibria, that is, why no other combination of wages and risk is as desirable along either isoprofit curve, and and explain why neither worker is willing to switch jobs in equilibrium. NOTE Answers that have no accompanying explanation will be awarded ZERO credit