Consider the following diagram: 1 wage/effort/probability of termination/keep he
ID: 1115043 • Letter: C
Question
Consider the following diagram:
1 wage/effort/probability of termination/keep her job/north-west/increasing/lose her job/south-east
According to the figure, points b and f give the worker the same level of value even though she's at the same level of ___ but at a higher level of____. That's mainly because in point f, although she is exerting more__ for the same__, she has a equal/higher/lower ____. In other words, at f, she's more likely to__ as compared to c. As we move__, the worker's value increases. The purple curve is the worker's best response function. For any given___, , it indicates the__ that would maximize her utility.
2 Consider the following diagram and select the statements that are true:
Select one or more:
a. The blue line passing through the axis represents the effort per dollar spent. The employer wants it to be as steep as possible.
b. The Nash equilibrium is at point n. The employer offers wage wN and the worker responds with an effort level of eN.
c. The Nash equilibrium is Pareto efficient.
d. The Nash equilibrium is Pareto inefficient.
e. The blue line passing through the axis represents the effort per dollar spent. The employer wants it to be as flat as possible.
3 Consider the following diagram and select the correct statements.
Select one or more:
a. v0 is the value that the worker experiences under a complete contract.
b. Workers are attaining positive economic rents under an incomplete contract.
c. Workers are not attaining positive economic rents under incomplete contracts. In fact they are being discriminated against.
d. Under an incomplete contract, there's a positive cost of job loss for the worker.
e. Under incomplete contracts, there's some workers that are willing to work at the going wage rate, but can not find employment.
4
Increase/decrease/remain the same
An increase in unemployment benefits causes the no-shirking wage to__.
An increase in the disutility of effort causes the no-shirking wage to___.
An increase in the probability that a shirking employee is detected causes the no-shirking wage to___.
An increase in the probability of finding a new job causes the no-shirking wage to___.
5
Select the correct statements, with reference to the no-shirking model in Section 11.8 ("macroeconomic application: labor discipline and the wage curve")
Select one or more:
a. In each round, all the employees that shirked lose their jobs.
b. An increase in the unemployment rate implies an increase in the no-shirking wage.
c. The lower the unemployment rate, the higher the no-shirking wage.
d. Even if an employee receives a wage higher than the no-shirking wage, he will continue to shirk with some probability.
e. In each round, all the employees that didn't shirk keep their jobs.
f. In this model, if employers had a perfect monitoring technology that allowed them to detect every single shirking worker, the wage would fall to zero.
Employee's PC Employee's ICC, or Best Response Function e(A, a) KID) Incomplete Contract Nash equilibrium Slope of iso-v -mrs V. Ve 0 w- B/s Wage, wExplanation / Answer
1 wage/effort/probability of termination/keep her job/north-west/increasing/lose her job/south-east
According to the figure, points b and f give the worker the same level of value even though she's at the same level of wage but at a higher level of effort. That's mainly because in point f, although she is exerting more effort for the same wage, she has a equal probability of termination. In other words, at f, she's more likely to /keep her job as compared to c. As we move south-east, the worker's value increases. The purple curve is the worker's best response function. For any given probability of termination, it indicates the effort that would maximize her utility.
4. An increase in unemployment benefits causes the no-shirking wage to increase. people have the cusion of unemployment benifits even if they lose their jobs
An increase in the disutility of effort causes the no-shirking wage to remain the same because workers efforts are not being utilized efficiently. If the workers are shirking then that is not affecting the work much.
An increase in the probability that a shirking employee is detected causes the no-shirking wage to remain the same.
An increase in the probability of finding a new job causes the no-shirking wage to increase because with low wage people have incentive to shirk and if fired, they will get new job easily. .
5. With reference to the no-shirking model ("macroeconomic application: labor discipline and the wage curve")
a. In each round, all the employees that shirked lose their jobs: because nder perfect competition, with monitoring, people who shirk their job will lose job. there is no cost for hiring a new worker in perfectly competitive market.
c. The lower the unemployment rate, the higher the no-shirking wage because if less people are uemployed, employers will have to pay higher wages to retain their employees.
d. Even if an employee receives a wage higher than the no-shirking wage, he will continue to shirk with some probability in case there is no perfect monetoring.
e. In each round, all the employees that didn't shirk keep their jobs.