Problem

1. Politicians who support the "green movement" often argue that it is profitable for firms to pursue a strategy that is "environmentally correct" (for example, build factories that do not pollute and are not noisy). Evaluate the validity of this claim.

2. Suppose there are two job characteristics that workers care about: wages and health insurance. If the government does not require employers to offer health insurance to their workers, what would be the relationship between the wage level in a particular job and whether the job offers health insurance? Suppose now that the government requires all firms to provide a standard package of health insurance to their workers, valued at, say, $5,000 a year. What happens to the wage structure in the labor market?