Managerial Economics: A Problem Solving Approach
5th Edition
ISBN: 9781337106665
Author: Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher: Cengage Learning
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Question
Chapter 1, Problem 7MC
To determine
The impact of welfare of low income family in reducing propensity work.
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Other things constant, which of the following job characteristics would be most likely to result in a higher pay rate for the job? a.The job involves working in pleasant surroundings. b.The job is widely viewed as prestigious. c.The job requires substantial amounts of stressful out-of-town travel. d.The employer provides low cost child-care services on the premises.
The demand for labor isa. derived demand.b. featherbedding demand.c. marginal utility demand.d. All of the answers above are correct.
Draw large and clear graphs. Show all your work.
1. What's the effect of a decrease in wage rates (w) on hours of work (explain the substitution and
income effects), reservation wage and probability of entering the labor force?
2. What's the effect of a decrease in non-labor income (v) on hours of work (explain the income
effect), reservation wage and probability of entering the labor force?
3. James earns $25 per hour for up to 45 hours of work each week. He is paid $40 per hour for
every hour in excess of 45. James faces a 30 percent payroll tax on every dollar earned through
work and receives $250 rent payment each week. Graph James' weekly budget line.
4. On separate graphs show and explain the effects of lump-sum cash transfers (cash transfer 1),
cash transfers which allow for work at reduced wages (cash transfer 2), and the earned income
tax credit on labor force participation rates.
Chapter 1 Solutions
Managerial Economics: A Problem Solving Approach
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