Sheldon is indifferent between a combination of 2% risk of injury and a wage rate of $15 per hour and a combination of 3% risk of injury and a wage rate of $18 per hour. Shelby is indifferent between a combination of 2% risk of injury and a wage rate of $16 per hour and a combination of 3% risk of injury and a wage rate of $18 per hour.
- Who has a stronger aversion toward risk?
- Consider a market "offer curve" that is concave (from below). Where along this curve is Sheldon's utility likely to be maximized? Compare this to where Shelby is likely to maximize utility. Explain.