rker's best response curve in the la o pay $12 per hour to minimise the 0.6 from the worker. Now conside

Essentials of Business Analytics (MindTap Course List)
2nd Edition
ISBN:9781305627734
Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson
Publisher:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson
Chapter11: Linear Optimization Models
Section: Chapter Questions
Problem 10P: The management of Hartman Company is trying to determine the amount of each of two products to...
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Consider a worker's best response curve in the labour discipline model. Currently the
firm chooses to pay $12 per hour to minimise the cost of effort, which induces an
effort level of 0.6 from the worker. Now consider a rise in the unemployment benefit.
Then:
At the wage rate of $12 per hour the worker will now exert more than 0.6 of
effort.
The firm's maximum units of effort per dollar of wage cost will be higher than
before the rise in the unemployment benefit.
The firm's new wage offer that minimises the cost of effort will be higher than
$12.
The firm can lower the wage rate to below $12 to maintain the effort level of
0.6.
Transcribed Image Text:Consider a worker's best response curve in the labour discipline model. Currently the firm chooses to pay $12 per hour to minimise the cost of effort, which induces an effort level of 0.6 from the worker. Now consider a rise in the unemployment benefit. Then: At the wage rate of $12 per hour the worker will now exert more than 0.6 of effort. The firm's maximum units of effort per dollar of wage cost will be higher than before the rise in the unemployment benefit. The firm's new wage offer that minimises the cost of effort will be higher than $12. The firm can lower the wage rate to below $12 to maintain the effort level of 0.6.
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