Imagine a rural area with a current wage rate of $20 at which 1500 workers are employed and 500 are unemployed. A government project will hire 50 workers at the going wage rate. Assume reservation wages for those hired are more or less uniformly distributed between $2 and $20. The METB is 0.2. Estimate the expected opportunity cost of project labor.

Imagine a rural area with a current wage rate of $20 at which 1500 workers are employed and 500 are unemployed. A government project will hire 50 workers at the going wage rate. Assume reservation wages for those hired are more or less uniformly distributed between $2 and $20. The METB is 0.2. Estimate the expected opportunity cost of project labor.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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