4. [6 mark] Yu Yan values her leisure at $10 per hour. If she is unemployed she

Question

4. [6 mark] Yu Yan values her leisure at $10 per hour. If she is unemployed she receives $7 per hour in unemployment benefits. If she is hired to work on a public project she will be paid S18 per hour (and will forfeit her unemployment benefit) a. What is the social opportunity cost of an hour of her time (the cost which would be entered in an efficiency benefit-cost analysis)? (2 marks) b. What is the total employment benefit per hour that would be entered in the referent group net benefit account if she was employed on a public project? (2 marks) ror c. What is the division of the hourly employment benefit between the worker and the government? (2 marks)

Explanation / Answer

1. Unemployment benefits $7 per hour

2. Work on a Public project = $18 per hour

Unemployment benefits = $7 per hour

Employment benefit per hour = 18 - 7 =$11 per hour

3. Hourly employment benefit between the worker, and, the Government

Public project wages per hour = $18 per hour

Unemployment benefits = $7 per hour (Benefit to the Government, will not have to pay)

Benefit to the worker = $18 per hour

Benefits also come in the form of profits on the project

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