Labor Economics
Labor Economics
7th Edition
ISBN: 9780078021886
Author: George J Borjas
Publisher: McGraw-Hill Education
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Chapter 5, Problem 13P
To determine

Determine labor market equilibrium.

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Consider an employee with a reservation wage of $6 an hour. The employee chooses an effort level between zero and one. Which of the following statements regarding her best response curve is correct? The best response curve describes the effort that the employee would choose for each level of the hourly wage. The best response curve is upward-sloping and convex. The curve crosses the horizontal axis at the origin. The average effort per dollar is increasing in wages.
You have two choices in jobs. Job A means you earn $70,000 a year, in an area where the average income is $80,000. Job B means you earn $60,000 a year in an area where the average income is $50,000. Assume all other factors such as housing quality, schooling, etc are the same. A "rational profit maximizer" would: Have an indeterminate choice. Be indifferent between the two wages. Always choose the lower wage. Always choose the higher wage.
Jasmine can work as much as 64 hours per week. She receives $200 per week in non-wage income. Her utility function for leisure and consumption is U(R, C) = 320R(1/2) + 2C , where R is hours of leisure and C is consumption. The price of consumption is unity.   (a) What is Jasmine's reservation wage?
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