laborps2

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

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

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

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

View Full Document
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
Ask a homework question - tutors are online