Economics In-Class Exercise: Equilibrium Wages and Job Types, Assignments of Market economy

Download Economics In-Class Exercise: Equilibrium Wages and Job Types and more Assignments Market economy in PDF only on Docsity! In-Class Exercise #6 Name: 1) Suppose there are two types of jobs: risky and safe. Suppose there are 100 workers in the economy and exactly 10 risky jobs available (the number of risky jobs does not change due to technological reasons). Worker 1’s reservation price for accepting a risky job (versus a safe job) is $1; worker 2’s reservation price is $2, etc. a) What is the equilibrium wage differential between safe and risky jobs? Who works in the risky jobs? b) Suppose there is an ad campaign sponsored by employers who offer risky jobs. This ad campaign romanticizes the “thrill of injury,” and changes worker’s preferences regarding risk. Now worker 1 has reservation price -$9, worker 2 has reservation price -$8 and so forth. What is the new equilibrium wage differential? 2) In general, there are 3 different type of jobs with respect to overtime pay: Type 1: requires overtime work Type 2: overtime hours available to those who want them Type 3: do not offer overtime work. Suppose that (controlling for other job characteristics), wages for Type 1 and Type 3 jobs are about the same. Suppose also that wages for Type 2 jobs are lower than those for both Type 1 and Type 3. What do these results tell us about worker preferences regarding overtime work? 4) Some employers offer health benefits and some employers do not. a) All else equal, how should wages for jobs that provide health benefits compare to those that do not? b) Who should take jobs without health benefits? c) Suppose the government mandates that all employers provide health benefits. Who will benefit? Who will be hurt?