Suppose, Worker 1 has a reservation price of 41 cents; worker 2s reservation price is 42 cents; worker 3s reservation price is 43 cents, and so on. There are 150 jobs in firms without air purification systems, and this number is fixed. Thus, the demand for workers in jobs with impure air is perfectly inelastic.
a) Find the equilibrium wage differential between safe and risky jobs.
b) Draw this equilibrium labeling as many points as you can.
c) Suppose now that the Occupational Safety and Health Administration (OSHA) forced additional firms to install air purification systems, bringing the number of jobs in firms without air purification systems down to 90. Find the new equilibrium wage differential between pure and impure air jobs. Draw this equilibrium, labeling as many points as you can