Question

The more ____________ the individual worker, the more he/she requires a ___________ compensating wage differential in return for accepting a riskier work environment. a. risk-loving; larger

b. risk-averse; larger
c. risk-averse; smaller
d. risk-neutral; smaller

Answer 1

The more risk-averse the individual worker, the more he/she requires a smaller compensating wage differential in return for accepting a riskier work environment. The correct answer is c. risk-averse; smaller.

Step-by-step explanation:

The correct answer is c. risk-averse; smaller.

According to the given information, the more risk-averse the individual worker is, the more they require a smaller compensating wage differential in return for accepting a riskier work environment. This means that workers who are more risk-averse are not willing to take on as much risk in their work and therefore require a smaller increase in wages to compensate for the risk.