quiz 2.3

If the expected duration of unemployment falls to 22 weeks, Maria's employment rent will be $3,080.

The figure below illustrates Maria's employment rent on her current job, given her wage, her disutility of work, the unemployment benefit, and the expect duration of unemployment. Which of the following statements is correct.

At A, given that the firm pays the hourly wage of $12, the worker's best response is to exert an effort of 0.5.

The figure depicts the efficiency wage equilibrium of a worker and a firm. Which of the following statements is correct?

The slope of the best response curve is the employer's marginal rate of transformation of higher wages into worker effort.

The following figure depicts an employee's best response to wage when the expected unemployment duration is 44 weeks. Which of the following statements is correct?

Employees' effort levels cannot be the basis of an enforceable contract.

Which of the following statements regarding employment contracts is correct?

The best response curve describes the effort that the employee would choose for each level of the hourly wage.

Consider an employee with a reservation wage of $6 an hour. The employee chooses an effort level between zero and one. Which of the following statements regarding her best response curve is correct?

Which of the following statements regarding employment rents is correct?

Employers can use high employment rents to exert power over employees

A possible explanation for why the wage level was not cut may be that the firm judged that the costs of lower employee morale and retention would be greater than what they would have saved in wages.

In their study of a firm during 2006-2010 that includes the financial crisis, Lazear and his co-authors found that (i) the firm's productivity increased dramatically as unemployment rose, and (ii) the wage level was kept unchanged. Based on this information, which of the following statements are correct?

The firm minimizes the cost per unit of effort

In which of the following cases would a firm be maximizing profits?