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B51A - Compensating Differentials Given : Suppose there are 100 workers in the economy in which all workers must choose to work a risky or

B51A - Compensating Differentials

Given:

Suppose there are 100 workers in the economy in which all workers must choose to work a risky or a safe job.

Worker 1's reservation price for accepting the risky job is $1;

worker 2's reservation price is $2, and so on.

Because of technological reasons, there are only 10 risky jobs.

Question:

What is the equilibrium wage differential between safe and risky jobs, and which workers will be employed at the risky firm?

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