18. Graphically, the reservation wage is shown by: (a) the slope of the budget c

Question

18. Graphically, the reservation wage is shown by: (a) the slope of the budget constrain at zero hours of work. (b) the slope of an indifference curve where the MRS is zero. (c) the slope of an indifference curve where hours of work are zero. (d) the slope of an indifference curve where it and the budget constraint are tangent. 19. Which of the following is an example of the failure of the market to achieve economic efficiency? (a) firms and employees successfully achieving all mutually beneficial transactions. (b) Dean would benefit from moving to a job in Vegas but he cannot borrow the money to finance the move. (c) Laura refuses to quit smoking even though Marlene offers her $1 per hour to stop (d) Ace Engineering is willing to pay Diane $11 per hour, but Diane is willing to work for $10 per hour, so Ace hires her for only $10 per hour 20. A regression of w = a + bx, where w is wages and X is hours worked per week yielded a t-statistic of 0.75 for b. This implies (a) hours worked are probably positively related to wages b) hours worked are probably negatively related to wages (c) hours worked are probably not related to wages d) hours worked are probably related to wages in a minor wa

Explanation / Answer

18. C

Explanation: The reservation wage is the lowest level of wage at which a worker would be willing to accept a job. Graphically, the reservation wage is shown by the slope of an indifference curve where hours of work are zero.

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