3. This question is about worker-employee matching. a) Explain and represent graphically why if there is only one employer and one employee than a binary choice between either a short work week with a low wage and a long one with a high wage cannot lead to a Pareto efficient equilibrium? b) What needs to happen to the setup of the bargaining between the employer and the worker for a Pareto efficient equilibrium to emerge? c) Explain why a binary choice between either a short work week with a low wage and a long one with a high wage can lead to Pareto efficient equilibria, as long as there are at least 2 workers and 2 employers, with each of the employers looking for exactly one worker. Will there are always be Pareto efficient equilibria in this case?

3. This question is about worker-employee matching. a) Explain and represent graphically why if there is only one employer and one employee than a binary choice between either a short work week with a low wage and a long one with a high wage cannot lead to a Pareto efficient equilibrium? b) What needs to happen to the setup of the bargaining between the employer and the worker for a Pareto efficient equilibrium to emerge? c) Explain why a binary choice between either a short work week with a low wage and a long one with a high wage can lead to Pareto efficient equilibria, as long as there are at least 2 workers and 2 employers, with each of the employers looking for exactly one worker. Will there are always be Pareto efficient equilibria in this case?

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter16: The Markets For Labor, Capital, And Land

Section: Chapter Questions

Problem 13P

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