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A simple model of search. Consider an agent who lives two periods. He is unemployed at the beginning of the first period and has a wage offer of w. If he accepts the wage offer w, he will work forever at that wage. If he rejects the offer, he receives an unemployment benefit of 4 dollars this period and he gets to draw a new offer next period. There are only two possible offers with equal probability next period: one wage offer of 8 dollars, and another offer of 24 dollars. The worker’s objective is to maximize the sum of expected discounted earnings. The discount factor β is 0.5. (a) How much would the agent value today a dollar tomorrow? (Hint: use the concept of discount factor). (b) What is the expected value of the potential offers? (c) What is the value for the worker if he accepts the current offer w? (d) What is the value for the worker if he rejects the current w? (e) What is his reservation wage? (f) Suppose he gets an offer of 16 dollars, would he accept or reject the offer? (g) Suppose he gets an offer of 6 dollars, would he accept or reject the offer? (h) Suppose that the government increases the unemployment benefit to 6 dollars. What would happen to this agent’s reservation wage? Prove your claim.
Suppose that a small town has seven burger shops whose respective shares of the local hamburger market are (as percentages of all hamburgers sold): 25%, 24%, 20%, 12%, 9%, 6%, and 4%. What is the Herfindahl index for the hamburger industry in this to..
I hereby offer you $5,001 if both you and my other creditor agree to cancel my debt. If either or both of you decline this offer, I will be legally in default and you will receive $5,000." So, what happens.
In Atlanta, the price elasticity of demand for bus rides is -0.5, the income elasticity of demand for bus rides is -0.1 and the cross price elasticity of demand for bus rides with respect to gasoline is 0.2. Describe the relationship between bus ride..
q. find the equilibrium price and quantity after the shift of the demand curve.if instead two new stores that sell
Elucidate what is the new market price. How many Frisbees are sold angry students marched to Washington, asked Frisbee price.
altering of the interest rate to change aggregate demand. Fact that equal increases in government spending and taxation will be contractionary.
A consumer’s income in the current period is y=100, and income in the future period is y’=120. He or she pays lump-sum taxes t=20 in the current period and t’=10 in the future period. The real interest rate is 0.1 or 10% per period. Compute the consu..
Assume that the federal government has decided to impose a tax on handguns. The market for handguns is currently at equilibrium with the price per gun being $200 and the quantity exchanged being 40,000 guns per month. Use a diagram to indicate the si..
The BlackBerry production function is Q = 2.83L1.52K0.82. Epple et al. (2010) estimate that the production function for U.S. housing is q = 1.38L0.144M0.856, where L is land and M is an aggregate of all other mobile, non-land factors, which we call m..
Do you agree or disagree that preventative services are a viable solution to cutting down on rising health care costs, and why or why not? Why do you think that not all insurance companies offer preventative services?
Consider a consumer who has preferences defined over commodities x and y. Suppose she is endowed with initial resources ω = (ωx,ωy) » 0 and faces prices p = (px, py). Draw the consumer's budget constraint, explicitly identifying the roles of ω and p...
Suppose that each worker in the Foreign country can produce two cars or three TVs. Assume that Foreign also has four workers. Graph the production possibilities frontier for the Foreign country. What is the no-trade relative price of cars in Foreign?
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