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Where does the worker choose to work

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Consider a competitive economy that has four different jobs that vary by their wage and risk level. The table below describes each of the four jobs.

Job

Risk (r)

Wage (w)

A

1/5

$3

B

1/4

$12

C

1/3

$23

D

1/2

$25

All workers are equally productive, but workers vary in their preferences. Consider a worker who values his wage and the risk level according to the following utility function:

Where does the worker choose to work? Suppose the government regulated the workplace and required all jobs to have a risk factor of 1/5 (that is, all jobs become A jobs). What wage would the worker now need to earn in the A job to be equally happy following the regulation?

Reference no: EM131270148

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