Question

Let's analyze the results of a fictional set of data for variation 1 of the Unemployment Compensation experiment. The table below shows the worker costs and buyer values assigned to the students in variation 1 of the experiment. A worker's cost of working is what that worker has to give up in order to work for one hour. The cost of working includes work-related expenses plus the unemployment compensation the worker passes up by working. An employer's buyer value is the amount of revenue that employer would earn from hiring a worker for one hour. Recall that these particular workers are low skilled. In variation 1 of this experiment, the government offered $1 of unemployment compensation to any worker who did not work. So, each worker's cost of working includes the $1 of unemployment compensation offered by the government. This table shows the workers' costs of working and the employers' buyer values in variation 1. Worker Number Worker's Cost of Working in Variation 1 ($) Employer Number Employer's Buyer Value in Variation 1 ($) 1 5.50 1 17.50 2 6.00 2 16.50 3 6.50 3 15.50 4 7.00 4 14.50 5 7.50 5 13.50 6 8.00 6 12.50 7 8.50 7 11.50 8 9.00 8 10.50 9 9.50 9 9.50 10 10.00 10 8.50

a)What is the highest wage employer 4 would be willing to pay to hire a worker for one hour? b)What is the lowest wage worker 4 would be willing to accept to work for one hour? ​c)What equilibrium wage does supply and demand analysis predict for this market? d)What equilibrium quantity of labor does supply and demand analysis predict for this market? e)What gain from hiring a single worker does supply and demand analysis predict for employer 4 in equilibrium? f)What gain from working does supply and demand analysis predict for worker 4 in equilibrium?

Answer 1