https/sakaiuriedu -c201-4329-a89e-289béa8a0167/tool/3601dase-4494-49e5-bldt The

Question

https/sakaiuriedu -c201-4329-a89e-289béa8a0167/tool/3601dase-4494-49e5-bldt The figure beow depicts the efect of a change in the unemployment benen on the workers best response curve. when the unemgo ment rate s ts which of the tollowing statements is correct following a rise in the unemployment benefit? Best response function with U-12% and low unemployment benefit Best response function with U-12% and high unemployment benefit Fl G 0 0 Hourly wage Reservation Wage set by wage firm A. The firm's profit level falls B. The workers reservation wage fais ?.The wage curve shits tothe right D. The firm sets a lower real wage

Explanation / Answer

Answer is option c

Wage curve shifts to right, bcoz unemployment benefit is parameter for the wage curve.

Option d is wrong, bcoz now as unemployment benefits have increased so workers will demand higher wage for the same effort level, thus firm will set higher wages now.

Option b is wrong bcoz reservation wages of workers now will rise.

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