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A worker has no non-labor income and is earning $14/hour.  He maximizes utility by working 40 hours per week.  Begin by drawing a graph that illustrates this to be the utility-maximizing solution.   The same worker loses his job.  He is entitled to unemployment compensation that will pay up to 50% of his weekly earnings.  The worker has an opportunity to supplement his unemployment compensation by taking a job that pays $7/hour.   Using the same graph, show the worker's new budget line and his utility-maximizing decision as whether to work the new job and how many hours to work.   Make sure your graph shows the relevant budget lines and indifference curves.

A worker has no non-labor income and is earning $14/hour.  He maximizes utility by working 40 hours per week.  Begin by drawing a graph that illustrates this to be the utility-maximizing solution.   The same worker loses his job.  He is entitled to unemployment compensation that will pay up to 50% of his weekly earnings.  The worker has an opportunity to supplement his unemployment compensation by taking a job that pays $7/hour.   Using the same graph, show the worker's new budget line and his utility-maximizing decision as whether to work the new job and how many hours to work.   Make sure your graph shows the relevant budget lines and indifference curves.

Macroeconomics: Private and Public Choice (MindTap Course List)
Macroeconomics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN:9781305506756
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Chapter7: Taking The Nation's Economic Pulse
Section: Chapter Questions
Problem 17CQ
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A worker has no non-labor income and is earning $14/hour.  He maximizes utility by working 40 hours per week.  Begin by drawing a graph that illustrates this to be the utility-maximizing solution.  

The same worker loses his job.  He is entitled to unemployment compensation that will pay up to 50% of his weekly earnings.  The worker has an opportunity to supplement his unemployment compensation by taking a job that pays $7/hour.  

Using the same graph, show the worker's new budget line and his utility-maximizing decision as whether to work the new job and how many hours to work.   Make sure your graph shows the relevant budget lines and indifference curves. 

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