Imagine a rural area with a current wage rate of $20 at which 1500 workers are employed and 500 are unemployed. A government project will hire 50 workers at the going wage rate. Assume reservation wages for those hired are more or less uniformly distributed between $2 and $20. The METB is 0.2. Estimate the expected opportunity cost of project labor.

Managerial Economics: A Problem Solving Approach
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ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
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Imagine a rural area with a current wage rate of $20 at which 1500 workers are employed and 500 are unemployed. A government project will hire 50 workers at the going wage rate. Assume reservation wages for those hired are more or less uniformly distributed between $2 and $20. The METB is 0.2. Estimate the expected opportunity cost of project labor.

 
 
 
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