Problem
A worker who is typical in all respects, works for a wage of $20,000 per year in a perfectly safe occupation. Another typical worker does a job requiring exactly the same skills as the first worker, but in a risky occupation with a known death probability of 1 in 1,000 per year, and receives a wage if $22,000 per year.
(a) What is the implied value of the life of a worker with these characteristics?
(b) It has just been revealed that death probability has been severely underestimated in the risky occupation and it actually is twice as much. In such a case, what would you expect the new equilibrium wage to be for the risky occupation? Explain briefly.
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.