Question

After a rash of injuries and deaths in the Big Choke Coal Mine, members of the Parliamentary Workplace Safety Committee are holding public hearings about proposed regulations to increase the level of safety at the Big Choke Mine.

a) TheParliamentaryWorkplaceSafetyCommitteearguesthattheproposed regulations will make the workers better off given the increased safety. Applying your knowledge of the neoclassical theory of compensating wages, use graphical analysis to evaluate this argument. Draw a graph for before and after the implementation of the proposed regulation. Explain each graph. (Assume there are two other mines in the coal mining industry.)

b) Would the Parliamentary Workplace Safety Committee’s argument remain the same if Big Choke Mine was the only mine in the industry?

c) An economist trained in the theory of imperfect information and behavioral economics is hired by the union representing mine workers. Using graphical analysis, outline and evaluate the argument which the economist might make if he/she believes that workers have imperfect information. What is the economist’s recommendation? (Hint: Your graph should only contain one iso-profit schedule.)

Answer 1

Answer:

Neoclassical theory claims that wage differentials are paid to compensate workers for the risks of work-related injury and death. Empirical support for the claim is based on findings from econometric studies over three decades. ... Much of the empirical support is found to be flawed. Neoclassical hypothesis asserts that wage differentials are paid to remunerate labourers for the dangers of business related injury and passing. Exact help for the case depends on discoveries from econometric examinations more than three decades. This paper reviews the neoclassical case for compensating wage differentials. The focus is on studies which examine the theory as it applies to the risk of traumatic work-related death, since this is where the evidence for the theory is thought to be strongest. Much of the empirical support is found to be flawed. This is due to data limitations, difficulties in constructing the risk variable and, more particularly, problems with omitted variables which result in risk premier being conflated with inter-industry wage differentials. It is concluded that the neoclassical theory underpinning the econometric literature is also deficient and inhibits a realistic understanding of the production and distribution of work-related health and safety risks. Compensation differential is a term utilized in labour financial aspects to investigate the connection between the pay rate and the obnoxiousness, hazard, or other unwanted qualities of a specific activity. A compensating differential, which is also called a compensating wage differential or an equalizing difference, is defined as the additional amount of income that a given worker must be offered in order to motivate them to accept a given undesirable job; relative to other jobs that worker could perform. One can also speak of the compensating differential for an especially desirable job, or one that provides special benefits, but in this case the differential would be negative: that is, a given worker would be willing to accept a lower wage for an especially desirable job, relative to other jobs

Factor price Y, Full employment level SY, -Factor supply curve O Y , Quantity of factor FIG. 4.1: SUPPLY CURVE OF FACTOR b) The mining industry contains five main industry segments, which are defined by the resources they produce: oil and gas extraction, coal mining, metal ore mining, non-metallic mineral mining and quarrying, and support activities for mining. The mining industry is involved in the extraction of precious minerals and other geological materials. The extracted materials are transformed into a mineralized form that serves an economic benefit to the prospector or miner. Main methods of mining are 1. Underground mines are more expensive and are often used to reach deeper deposits. 2. Surface mines are typically used for more shallow and less valuable deposits. 3. Placer mining is used to sift out valuable metals from sediments in river channels, beach sands, or other environments. 4. In-situ mining, which is primarily used in mining uranium, involves dissolving the mineral resource in place then processing it at the surface without moving rock from the ground.

The method used depends on the type of mineral resource that is mined, its location at or beneath the surface, and whether the resource is worth enough money to justify extracting it. Each mining method also has varying degrees of impact on the surrounding landscape and environment. Metal Mining and the Environment (Booklet). American Geosciences Institute. Gives fundamental data about the mining cycle, from investigation for financial mineral stores to mine conclusion. The booklet discusses the environmental aspects of metal mining and illustrates the ways science and technology assist in preventing or reducing environmental impacts Coal Mining and Transportation (Webpage). U.S. Energy Information Administration Webpage describing different methods used for mining processing, and transporting coal. Uranium: How is it Mined? (Webpage). New Mexico Bureau of Geology & Mineral Resources Webpage describing the three main methods used to mine uranium: open-pit, underground, and in-situ leaching. 'Imperfect Competition' Definition: Imperfect competition is a competitive market situation where there are many sellers, but they are selling heterogeneous (dissimilar) goods as opposed to the perfect competitive market scenario. As the name suggests, competitive markets that are imperfect in nature. Under imperfect competition, there are large number of buyers and sellers. Each seller can follow its own price-output policy.

Characteristics: a) Large number of Sellers and Buyers b) Product Differentiation c) Selling Costs d) Free Entry and exit of Firms e) Price-makers f) Blend of Competition and Monopoly The most common examples of imperfect competition are monopoly, monopolistic competition, and oligopoly. Market Structure Perfect Competition Imperfect Competition Monopoly Duopoly Oligopoly Monopolistic Competition Behavioural economics

Conduct financial matters is a part of monetary research that adds components of brain research to customary models trying to more readily comprehend dynamic by speculators, shoppers and other financial members.Behavioral economics is the study of the effect that psychological factors have on the economic decision-making process of individuals. The importance of understanding behavioural economics for marketers is immeasurable as it allows for a better understanding of the human mind. Alas behavioural economics explains that humans are not rational and are incapable of making good decisions. Behavioural economics draws on psychology and economics to explore why people sometimes make irrational decisions, and why and how their behaviour does not follow the predictions of economic models. Founding Father of Behavioural Economics Wins Nobel Prize. Richard H. Thales, the University of Chicago economist whose contributions linking psychology to the 'dismal science caught the public's eye in his co-authored bestselling book Nudge, has received this year's Nobel Prize in economic sciences In an ideal world, people would always make optimal decisions that provide them with the greatest benefit and satisfaction. In economics, rational choice theory states that when humans are presented with various options under the conditions of scarcity, they would