5. A C Where a group of potential attendees at an event is made up of one group who all want high attendance and another who prefer low attendance, the only equilibrium possible is zero attendance. attendance will be stable at 50%. B D equilibrium outcomes may or may not exist, or might be unstable and/or oscillating. full attendance will be the long-run equilibrium.
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- fmagine that somecne offered you a choice, You couldspend four years studying at the world 's best uni•versity, but you would have to keep your attendancethere a secret Or you could be awarded an official degree from the world's best university, but you couldn'.tactually attend. Which choice do you think wouldenhance your future earnings more? What does youranswer say about the debate over signaling versus human capital in the role of education?Suppose that Congress passes a law requiringemployers to provide employees some benefit (suchas healthcare) that raises the cost of an employee by$4 per hour.a. What effect does this employer mandate haveon the demand for labor? (In answering this andthe following questions, be quantitative whenyou can.)b. If employees place a value on this benefit exactlyequal to its cost, what effect does this employermandate have on the supply of labor?c. If the wage can freely adjust to balance supply anddemand, how does this law affect the wage andthe level of employment? Are employers better orworse off? Are employees better or worse off?d. Suppose that, before the mandate, the wage in thismarket was $3 above the minimum wage. In thiscase, how does the employer mandate affect thewage, the level of employment, and the level ofunemployment?e. Now suppose that workers do not value themandated benefit at all. How does this alternativeassumption change your answers to parts(b) and (c)?When company executives buy and sell stock basedon private information they obtain as part of theirjobs, they arc engaged in insider lmding.:t Give an example of inside information that mi~;htbe useful for buying or selling stock.h. "rho,::,.. who trnriP "'tnrh hMM nn in"irlPinformation usuaUy cam very high rates ofreturn. Docs this fact violate the efficient marketshypothesis?c. Insider trading is illegal. Why do you supposethat is?
- Venture capital (VC) firms are pools of privatecapital that typically invest in small, fast-growingcompanies, which usually can’t raise funds through other means. In exchange for this financ-ing, the VCs receive a share of the company’s equity, and the founders of the firm typically stayon and continue to manage the company.a. Describe the nature of the incentive conflictbetween VCs and the managers, identifyingthe principal and the agent. b. VC investments have two typical com-ponents: (1) managers maintain some ownership in the company and often earnadditional equity if the company performs well; (2) VCs demand seats on the compa-ny’s board. Discuss how these two compo-nents help address the incentive conflict.Policymakers sometimes propose laws requiringfirms to give workers certain fringe benefits, such ashealth insurance or paid parental leave. Let’s considerthe effects of such a policy on the labor market.a. Suppose that a law required firms to give eachworker $3 of fringe benefits for every hour that theworker is employed by the firm. How does this lawaffect the marginal profit that a firm earns from eachworker at a given cash wage? How does the lawaffect the demand curve for labor? Draw your answeron a graph with the cash wage on the vertical axis.b. If there is no change in labor supply, how wouldthis law affect employment and wages?c. Why might the labor-supply curve shift inresponse to this law? Would this shift in laborsupply raise or lower the impact of the law onwages and employment?d. As discussed in Chapter 6, minimum-wage lawskeep the wages of some workers, particularlythe unskilled and inexperienced, above theequilibrium level. What effect would a fringebenefit mandate have…Question 12 Consider a workplace that has two workers who can work as a team. Each worker can put in effort worker 1's effort is labelled el and worker 7's as e2. These effort chores are made simultaneously. Output of the team is Bel+ 4e2. Each worker bears the cost of their effort and has a utility of Ui-wi-ei, where i-1.2 and wi is the wage that the worker ves Now assume that the effort of each worker is unobservable but team output can be contracted on. In fact, assume that the balanced-budget nule holds in that each worker receives half of team output as their wage. What are the efforts that each workers put in? Oel-3, e2-3) O None of the other answers are correct. O el 2, e2-1 O el-1,e2-1 O e1-4, 2-2
- Use graph to illustrate the matching of employers and employees under hedonic wage theory with risk of injury. Assume there are two employees of different types (A and B), and two employers of two different types (X and Y). Worker A maximizes utility along A2 by working for Employer X for WAX and risk level RAX. Worker B maximizes utility along B2 by working for Employer Y for high wage WBY and with high risk level RBY Please draw the indifference curves and the iso-profit curves with zero profit, point out the two tangent points that measure the matching points for both employers and employees. (Hint: use Risk of Injury as the horizontal axis.)It is the morning commute in Congestington, DC. Of 100 drivers, eachdriver is deciding whether to take the toll road or take the back roads. Thetoll for the toll road is $10, while the back roads are free. In deciding ona route, each driver cares only about income, denoted y, and his traveltime, denoted t. If a driver’s final income is y and his travel time is t, thenhis payoff is assumed to be y - t (where we have made the dollar value ofone unit of travel time equal to 1). A driver’s income at the start of the dayis $1,000. If m drivers are on the toll road, the travel time for a driver onthe toll road is assumed to be m (in dollars). In contrast, if m drivers takethe back roads, the travel time for those on the back roads is 2m (again,in dollars). Drivers make simultaneous decisions as to whether to take thetoll road or the back roads.a. Derive each player’s payoff function (i.e., the expression that gives usa player’s payoff as a function of her strategy profile.)b. Find a Nash…Suppose Carl’s wage-schooling locus is given byYears of Schooling Earnings 9 $18,500 10 $20,350 11 $22,000 12 $23,100 13 $23,900 14 $24,000Derive the marginal rate of return schedule. When will Carl quit school if his discount rate is 4 percent? What if the discount rate is 12 percent?
- Assume that the current Disability Insurance (DI) benefi t for those whoare unable to work is $X per day and that DI benefi ts go to zero if aworker accepts a job for even 1 hour per week. Suppose that the benefi trules are changed so those disabled workers who take jobs that pay lessthan $X per day receive a benefi t that brings their total daily income(earnings plus the DI benefi t) up to $X. As soon as their labor marketearnings rise above $X per day, their disability benefi ts end. Draw theold and new budget constraints (label each clearly) associated with theDI program, and analyze the work-incentive effects of the change inbenefi ts.Using data from the last 10 semesters in ETC2410, we have observed that students who attended tutorials obtained a higher mark on the final exam, on average, relative to those who did not attend tutorials. From this observation alone we can say that Select one: tutorial attendance is a good predictor of performance on the final exam O a. O b. tutorials are an essential component of learning in ETC2410 O c. if we had forced students who attended all tutorials not to attend any tutorials, they would have obtained a lower mark on their final exams, on average O d. tutorials cause better performance on the final exam O e. if we had forced students who did not attend tutorials to attend all tutorials, they would have obtained a higher mark on their final exams, on averagePolicymakers sometimes propose laws requiring firms to give workerscertain fringe benefits, such as health insurance or paid parental leave.Let's consider the effects of such a policy on the labor market.a. Suppose that a law required firms to give each worker $3 of fringebenefits for every hour that the worker is employed by the firm. Howdoes this law affect the marginal profit that a firm earns from eachworker at a given cash wage? How does the law affect the demand curvefor labor? Draw your answer on a graph with the cash wage on thevertical axis. b. If there is no change in labor supply how would this law affectemployment and wages? c. Why might the labor-supply curve shift in response to this law? Wouldthis shift in labor supply raise or lower the impact of the law on wagesand employment? d. As discussed in Chapter 6, the wages of some workers, particularly theunskilled and inexperienced, are kept above the equilibrium level byminimum wage laws. What effect would a fringe-benefit…