Web Problem Set 03 - RP, Labour-Leisure, Two-Period

2 3 unions commonly bargain for a basic wage rate w

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Unformatted text preview: bargain for a basic wage rate w and an overtime rate. Assume that the overtime rate is 1.5w and that it is paid for hours worked in excess of 40 per week. a) Construct the relevant budget line between leisure and a composite good. b) Assuming that the union member would choose to work 40 hours per week at wage rate w, will he or she want to work overtime? c) Assuming that members are contractually obliged to work at least 40 hours per week, illustrate the conditions under which the union member would prefer no overtime work. 4. Ralph currently has two jobs. His primary job pays well, $20 per hour, but he can work no more than 40 hours per week at it. In fact, he always chooses to work 40 hours at his job. His secondary job pays only $15 per hour, but he can work as few or as many hours as he wants. Currently he chooses to work 10 hours at his secondary job. For Ralph, leisure is a normal good. If the wage rate for his primary job increases to $22 per hour, will Ralph increase or decrease the number of hours he works in the secondary job? 5. Mr. Lucky intends to sp...
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