Review Questions

1.
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Dougal works in a sewage farm. The rental value of his labor is $22K. The good news is that it provides excellent daycare for his two children, which is worth $5.00. The bad news is that it also sells him odious working conditions for −$2000. What is Dougal's predicted wage?
2.
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Explain why indifference curves are positively sloped if the workplace attribute, z, is a bad.
3.
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What is meant by an iso-profit schedule? Explain why the typical iso-profit schedule is upward sloping.
4.
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Explain why it is not ridiculous to imagine that the typical firm accrues zero profits in equilibrium.
5.
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Outline the principles of cost-benefit analysis.
6.
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Define a compensating variation, CV.
7.
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Discuss whether it is reasonable to ascribe a dollar value to life.
8.
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If policy Q saves S = 100 lives a year among L = 20,000 workers, and if each worker's compensating variation is $300, then what is the value of a statistical life (VSL)?

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