Explain what is meant in economics by “reservation wage”.
1.1 Explain what is meant in economics by “reservation wage”.
1.2 Discuss what you think will happen to the reservation wage if:
1.2.1 Unemployment Benefits increase
1.2.2 Health insurance is tied to holding a job
1.2.3 A more infectious and deadly COVID?19 variant is discovered
1.3 Do firms always pay wages that are equal to their workers’ reservation wages? Why or why not?
Problem 2 Do Exercise 6.7 in Chapter 6 of the online book.
Problem 3 The figure shows the changes in total working hours in a sample of countries during the twentieth century.
3.1 Why do you think hours of work have decreased over time even if wages have increased? [Think about Income and Substitution Effects from a wage increase]
3.2 What do you think might account for differences in preferences for working hours among workers in different countries? [You can consider any country, not just those in the Figure]
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