The construction industry employs carpenters. Construction work has some risk to personal safety because carpenters must use tools that can be dangerous if not used properly (e.g. air nailer, saws, etc.), carpenters often have to work in high places (e.g. on ladders, roofs, etc.) and have to lift/place heavy items (e.g. steel i-beams, trusses, etc.) that could hurt someone badly if they fell on them.
Locally, the construction industry is also a perfectly competitive industry. This means that local construction companies have 'zero economic profits' (i.e. they make profits from an accounting perspective but no one construction company makes higher profits than theothers). Two construction companies that operate locally are Bob the Builder Construction Company and Bomler Construction Company. The zero profit isoprofit curves for both companies are as follows:
Bob the Builder: WBB = 20 + 0.5R
Bomler: WBOM = 19 + 0.75R
Use the above information to answer the questions below
a) Draw the zero-profit iso-profit curves for both companies. What assumption about marginal returns to safety expenditures underlie a linear iso-profit curve?