3. This question is about worker-employee matching. a) Explain and represent graphically why if there is only one employer and one employee than a binary choice between either a short work week with a low wage and a long one with a high wage cannot lead to a Pareto efficient equilibrium? b) What needs to happen to the setup of the bargaining between the employer and the worker for a Pareto efficient equilibrium to emerge? c) Explain why a binary choice between either a short work week with a low wage and a long one with a high wage can lead to Pareto efficient equilibria, as long as there are at least 2 workers and 2 employers, with each of the employers looking for exactly one worker. Will there are always be Pareto efficient equilibria in this case?

ENGR.ECONOMIC ANALYSIS
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ISBN:9780190931919
Author:NEWNAN
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Chapter1: Making Economics Decisions
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3. This question is about worker-employee matching.
a) Explain and represent graphically why if there is only one employer and one
employee than a binary choice between either a short work week with a low
wage and a long one with a high wage cannot lead to a Pareto efficient
equilibrium?
b) What needs to happen to the setup of the bargaining between the employer
and the worker for a Pareto efficient equilibrium to emerge?
c) Explain why a binary choice between either a short work week with a low
wage and a long one with a high wage can lead to Pareto efficient equilibria,
as long as there are at least 2 workers and 2 employers, with each of the
employers looking for exactly one worker. Will there are always be Pareto
efficient equilibria in this case?
Transcribed Image Text:3. This question is about worker-employee matching. a) Explain and represent graphically why if there is only one employer and one employee than a binary choice between either a short work week with a low wage and a long one with a high wage cannot lead to a Pareto efficient equilibrium? b) What needs to happen to the setup of the bargaining between the employer and the worker for a Pareto efficient equilibrium to emerge? c) Explain why a binary choice between either a short work week with a low wage and a long one with a high wage can lead to Pareto efficient equilibria, as long as there are at least 2 workers and 2 employers, with each of the employers looking for exactly one worker. Will there are always be Pareto efficient equilibria in this case?
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