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Unformatted text preview: income if working is Y . The workers utility function is U ( Y ), which exhibits declining marginal utility of income. (a) What is the slope of a expected-utility indierence curve (a curve that gives equal utility for dierent combinations of income in the two states)? (b) Draw a graph demonstrating that the worker would be willing to accept a lower expected income in return for eliminating the risk of being laid-o. (c) Would the worker want to buy unemployment insurance if it was oered at fair rates for the workers situation? 1 (d) Can you think of any problems that would lead private rms to be reluctant to oer unemployment insurance? (e) Can you think of any problems with government-provided unemployment insurance? 2...
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