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Household labor. (Adapted from Ehrenberg & Smith). Company P routinely hires skilled technicians on one-year contracts to work in remote locations. It oers a $20,000 signing bonus and an hourly wage of $30 per hour. Company S now enters the market and oers no singing bonus, but oers an hourly wage of $40 per hour. Company U pays $35 per hour for the rst 2,000 hours of employment, but then $40 per hour after that. All companies want employees who work more than 2,000 hours in a year (out of 4,000 possible).
(a) First, suppose that a worker receives an offer from all three companies; on the same graph, draw the income-household time (''''budget") constraint for the coming year under both offers. (Clearly label each company with dierent colors and an actual label).
(b) Second, consider a worker for Company P who chose to work 3,000 hours last year. Suppose the contract is up and that she now has offers from Company S and U. Describe the conditions under which she would continue to work 3,000 hours, increase hours, and decrease hours worked.
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