laborps2

laborps2 - Problem Set 2(Due 5/25 1 Economics 421 Spring...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Economics 421 Spring 2004 Lich-Tyler Problem Set 2 (Due 5/25) 1. Dante works at the Konvenient-Mart, where he earns a wage of $ W . He can decide to “supply effort” or to “shirk.” If he supplies effort, he receives his wage for sure, but he also incurs disutility of working worth $2. If he shirks, he incurs no cost of working, but with probability ! his boss catches him. If caught, he loses his job and spends the time playing hockey, which he values at $4; if not, he receives his wage. a. Find, as a function of , the lowest wage that will keep Dante from shirking. (Assume that, if indifferent, he will supply effort.) b. When = 1 , what is the no-shirk wage? Can you interpret this? c. When = 0.5 , what is the no-shirk wage? d. What happens to the no-shirk wage as decreases? 2. Mr. and Mrs. Shrek enjoy two goods: the quality and quantity of their children. They each live for 30 years. To have a child, Mrs. Shrek must take off 3 years from work. All of their market earnings are invested in the quality
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 03/19/2010 for the course ECON 480 taught by Professor Kinlaw during the Spring '08 term at UNC.

Page1 / 2

laborps2 - Problem Set 2(Due 5/25 1 Economics 421 Spring...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online