Question
After a rash of injuries and deaths in the Big Choke Coal Mine, members of the Parliamentary Workplace Safety Committee are holding public hearings about
After a rash of injuries and deaths in the Big Choke Coal Mine, members of the Parliamentary Workplace Safety Committee are holding public hearings about proposed regulations to increase the level of safety at the Big Choke Mine.
a) The Parliamentary Workplace Safety Committee argues that the proposed regulations will make the workers better off given the increased safety. Applying your knowledge of the neoclassical theory of compensating wages, use graphical analysis to evaluate this argument. Draw a graph for before and after the implementation of the proposed regulation. Explain each graph (assume there are two other mines in the coal mining industry).
b) Would the Parliamentary Workplace Safety Committee's argument remain the same if Big Choke Mine was the only mine in the industry?
c) An economist trained in the theory of imperfect information and behavioral economics is hired by the union representing mine workers. Using graphical analysis, outline and evaluate the argument which the economist might make if he/she believes that workers have imperfect information. What is the economist's recommendation? (Hint: Your graph should only contain one iso-profit schedule.)
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