Suppose that the marginal revenue from search is given by:
MR = 100 - 4w
where w is the wage offer at hand. The marginal cost of search is given by:
MC = w.
Draw a graph depicting the two functions provided above.
Use the marginal revenue and marginal cost curves above to solve for
the maximum and minimum expected wage offers for this worker. Indicate
these results on your graph in (A).
Depict a $10 wage offer in your graph in (A) above. Would the worker
accept the job offer?
Solve for the asking wage and depict your result on your graph in (A).
Suppose that the worker can now collect unemployment insurance that
is worth $200 a week. If the worker works 40 hours a week, what would
be the new MC function. (Hint: how will the UI insurance affect the intercept
of the MC function).
Use this new MC function to solve for the new asking wage.
Explain how a good-old-boy network (i.e., a collection of individuals who
share a common bond that leads them to help one another) might effect the
marginal cost and benefit from search, effect the reservation wage, and effect
the actual wages of persons who are connected to the network versus those
who are not if both would face the same wage offer distribution in the absence
of the network.
The Federal Reserve Board has, in recent years, adopted a policy of using
interest rates to aggressively combat inflation.
Use the Phillips curve to aid your explanation of the short-run implications
of an anti-inflationary policy on employment. Who is likely to benefit
and who is likely to loose from such a policy?
Use the Phillips curve to aid your explanation of the long-run implication
of an anti-inflationary policy on employment. How can such a policy be
justified in the long run? Explain.
Nearly all federal government job opening across the country can be found
on "the Web." It is likely that in the near future all job openings,
both private and public, will be accessible from a personal computer. Explain
the likely effect of this technological development on:
