Gold mining is very dangerous and firms often buy specialized safety equipment to make the job safer. The first graph shows the labor market for gold miners and the second graph shows the marginal cost (MC) for the firm for safety equipment. For each unit of safety equipment that the firm buys, they can reduce the premium they pay to their laborers by 10% of the wage in the labor market. 1. Show the effect of an increase in worker productivity by shifting the appropriate curve in the first graph. 2. In the second graph, show the effect of the change in gold miner wages on the marginal benefit of the safety equipment by placing the two marginal benefit (MB) curves appropriately. Wage (5) 100 888888 70 60 10 0 Supply 100 200 300 400 500 600 700 800 900 1,000 Cost or benefit (5) 10 8 6 a 2 1 0 0 1 MB before 2 MB after 3 4 5 07 Quantity of safety equipment MC

Gold mining is very dangerous and firms often buy specialized safety equipment to make the job safer. The first graph shows the labor market for gold miners and the second graph shows the marginal cost (MC) for the firm for safety equipment. For each unit of safety equipment that the firm buys, they can reduce the premium they pay to their laborers by 10% of the wage in the labor market. 1. Show the effect of an increase in worker productivity by shifting the appropriate curve in the first graph. 2. In the second graph, show the effect of the change in gold miner wages on the marginal benefit of the safety equipment by placing the two marginal benefit (MB) curves appropriately. Wage (5) 100 888888 70 60 10 0 Supply 100 200 300 400 500 600 700 800 900 1,000 Cost or benefit (5) 10 8 6 a 2 1 0 0 1 MB before 2 MB after 3 4 5 07 Quantity of safety equipment MC

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter8: Market Failure

Section: Chapter Questions

Problem 4P

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