Suppose that an increase in the equilibrium compensating wage differentialbetween risk jobs and safe jobs has been observed. Two reasons for this changehave been suggested: (1) it is now more costly for firms to create safe workingconditions and (2) there is a government advertising campaign that alterspreferences, thereby convincing workers to require more compensation to take onrisk.Using supply and demand diagrams, show how each of the two developmentscan explain the increase in the compensating wage differential. Can informationon the number of workers in the risky occupation help determine whichexplanation is more plausible?