Microeconomics
21st Edition
ISBN: 9781259915727
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
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Question
Chapter 23, Problem 13DQ
To determine
The auto insurance premiums.
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• Label axis variables
• Label curves
Highlight the market envelope
• Draw the wage-safety locus
• Add indifference curves for
a different worker. Are they
more or less risk-averse?
Assume that a worker has the Utility Function U(C,L)-C060 LO40
"C" refers to consumption in dollars and "L" to hours of leisure in a day. The worker has an offered wage of $10
per hour, 20 hours available for leisure or work per day, and $90 dollars a day from non-labour income.
a) Find the budget constraint equation of the individual.
b) Find the optimal choice for the individual in terms of units of leisure and income,
the number of hours worked and the utility obtained.
Make a well labeled graph that illustrates the solution to the problem of the worker.
c)
d) Find the supply equation of the individual.
e) Calculate the reservation wage and briefly explain the definition.
The wage when T=L or hours of work equal 0.
45. Consider the following two statements:
(1) According to the Blinder-Oaxaca decomposition of the wage gap between two groups of
workers, differences in rewards for characteristics are considered to be evidence of
discrimination.
(2) Correspondence studies will never underestimate the extent of discrimination.
What can you say about these two statements?
O a. Both statements are incorrect.
O b. Statement (2) is correct, statement (1) is incorrect.
O c. Statement (1) is correct, statement (2) is incorrect.
O d. Both statements are correct.
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8. All of the following can be deemed as a tradeoff between equity and efficiency except
O a. unemployment compensation programs.
O b. students working individually on a project except collective group work.
Oc. disability programs.
Od. welfare programs.
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