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ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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Figure 6.4 depicted Maria's best response curve when the expected duration of
unemployment was 44 weeks. Which of the following statements is correct?
1
Effort per hour
0.8
0.5
0
06
Select one or more:
Slope = MRT
Reservation
wage
12
Feasible
set
24
Hourly wage ($)
Maximum possible effort
Worker's best response curve
when expected unemployment
duration is 44 weeks
If the expected unemployment duration increased to 50 weeks, Maria's best
response to a wage of $12 would be an effort level above 0.5.
O b. If the unemployment benefit was reduced, then Maria's reservation wage would be
higher than $6.
O c. Over the range of wages shown in the figure, Maria would never exert the maximum
possible effort per hour.
Od. Increasing effort from 0.5 to 0.6 requires a bigger wage increase than increasing
effort from 0.8 to 0.9."
Transcribed Image Text:n
Figure 6.4 depicted Maria's best response curve when the expected duration of
unemployment was 44 weeks. Which of the following statements is correct?
1
Effort per hour
0.8
0.5
0
06
Select one or more:
Slope = MRT
Reservation
wage
12
Feasible
set
24
Hourly wage ($)
Maximum possible effort
Worker's best response curve
when expected unemployment
duration is 44 weeks
If the expected unemployment duration increased to 50 weeks, Maria's best
response to a wage of $12 would be an effort level above 0.5.
O b. If the unemployment benefit was reduced, then Maria's reservation wage would be
higher than $6.
O c. Over the range of wages shown in the figure, Maria would never exert the maximum
possible effort per hour.
Od. Increasing effort from 0.5 to 0.6 requires a bigger wage increase than increasing
effort from 0.8 to 0.9.
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- Problem 2 Let's assume you’ve found the following labor demand and supply curves: Lp 30 – w Ls = 2w (a) Solve for the equilibrium wage and employment level. (b) Graph the demand and supply curves. (c) At this equilibrium, what is your welfare/gains from trade? (d) Now, assume a minimum wage has been implemented at $20. How will this impact your demand? Supply? (e) How many workers are displaced by this new policy? How much “extra" unemployment occurs with this new policy? Hint: Think about the reservation wage. (f) Graph the new labor demand and supply with this minimum wage. (g) At this equilibrium, what is your new welfare? Are you better off with this change? Explain.arrow_forwardIn the 1970s Sweden adopted several new labour market policies affecting layoffs. Three were notable: (1) Plants that provided in-plant training instead of laying of workers in a recession received subsidies. (2) All workers had to be given at least one month's notice before being laid off, and the required time in he average plant was two to three months. (3) Laid-off workers had to be given first option on new jobs with the former employer.. What probable effects would these policies have on unemployment? governmentarrow_forwardBaghibenarrow_forward
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