hw7soln - PADP 8670 Fall 2011 F ertig UGA Homework 7...

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Unformatted text preview: PADP 8670 Fall 2011 F ertig UGA Homework 7 Solutions 1. Suppose that Congress increases the minimum wage to $10 per hour. Does the change in the number ofemployed workers due to this policy change depend on the elasticity ofdemand for labor, the elasticity of supply, or both? Show graphically. The change in the number ofemployed workers depends on the elasticity oflabor demand. If firms' labor demand is wage-inelastic, they will not reduce employment much when the minimum wage is increased. LDiAeLM/h C/ 1/ The elasticity of labor supply will NOT affect the number of employed workers, but will affect the number of UNemployed. if workers’ labor supply is very elastic with respect to wage, then an increase in the minimum wage will greatly increase the number of workers who begin looking for work and thus join the number of unemployed people. 2. Wastewater treatment is the process ofremoving contaminants from wastewater and househoid sewage to provide a safe output [environmentaily and in terms of public health] for disposal or reuse. Wastewater treatment is a pubiic good because no one can be excluded from enjoying the benefits of safe wastewater and no one can be forced to pay to have their wastewater treated [without government regulations]. Discuss whether the free—rider problem ofwastewater treatment would be a good candidate for private contracting [with public financing], or if public provision is necessary. Private contracting of public goods is possibIe if: 1) the task for which a private firm is being hired is clearly defined, and 2) the quality of the good or service to be delivered is easily observed and measured. Given that wastewater treatment is a specific task with a measureable output and measureabie quality, both of these criteria should be easily met. Therefore, private contracting should be preferable approach. Private contracting is likely to be lower cost and involve greater innovation than public provision. ...
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This note was uploaded on 01/18/2012 for the course PADP 8670 taught by Professor Staff during the Fall '10 term at University of Georgia Athens.

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hw7soln - PADP 8670 Fall 2011 F ertig UGA Homework 7...

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