ECO101H1 Chapter Notes - Chapter 6: Utility, Reservation Price, Demand Curve

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ECO101H1 Full Course Notes
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ECO101H1 Full Course Notes
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If it is profitable for firms to build factories that do not pollute and are not noisy, they would have been built already. After all, firms could build these profit-maximizing factories and attract persons to work at these factories at lower wages because no compensating differential would be needed. The fact that compensating differentials exist and that governments attempt to regulate the quality of the workplace implies that providing these amenities to workers is more costly than cost-saving. Suppose wages and health insurance are the only two job characteristics workers care about. Describe the relationship between the wage level in a particular job and whether the job offers health insurance if the government does not require employers to offer health insurance to their workers. In other words, jobs that offered health insurance would pay less than jobs that did not offer such plans. Workers choose to work a risky or a safe job.

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