Chapter 6: Problem 18
As a general rule, is it safe to assume that a higher wage will encourage significantly more hours worked for all individuals? Explain.
Chapter 6: Problem 18
As a general rule, is it safe to assume that a higher wage will encourage significantly more hours worked for all individuals? Explain.
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Get started for freeAccording to the model of intertemporal choice, what are the major factors which determine how much saving an individual will do? What factors might a behavioral economist use to explain savings decisions?
How would an increase in expected income over one’s lifetime affect one’s intertemporal budget constraint? How would it affect one’s consumption/saving decision?
What is the rule relating the ratio of marginal utility to prices of two goods at the optimal choice? Explain why, if this rule does not hold, the choice cannot be utility-maximizing.
Think about the backward-bending part of the labor supply curve. Why would someone work less as a result of a higher wage rate?
The rules of politics are not always the same as the rules of economics. In discussions of setting budgets for government agencies, there is a strategy called “closing the Washington Monument.” When an agency faces the unwelcome prospect of a budget cut, it may decide to close a high-visibility attraction enjoyed by many people (like the Washington Monument). Explain in terms of diminishing marginal utility why the Washington Monument strategy is so misleading. Hint: If you are really trying to make the best of a budget cut, should you cut the items in your budget with the highest marginal utility or the lowest marginal utility? Does the Washington Monument strategy cut the items with the highest marginal utility or the lowest marginal utility?
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