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Unformatted text preview: will not hire her. Which one of the following could explain Bobs decision? ( a ) Bob discriminates against women. ( b ) The price of widgets is zero. ( c ) Consumers love widgets. Answer : 1(iv)b . If Alice works for free, the cost of making another widget to Bob is zero for output levels up to 79 units. Since Bob only cares about making money, he would allow Alice to work some amount if the price of a widget is greater than the cost incurred to produce it. Because Bob does not want any widgets produced at a cost of zero, we can conclude that he could not have made any money by selling them: That is, the price of widgets must be zero. If consumers loved widgets, Bob would have been able to get at least someone to pay for widgets and would have employed Alice. 2...
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- Fall '07