Question Three. 1. Look at the diagram below. Consider the scenario where citizens have almost all the bargaining power. What will be the equilibrium outcome in this scenario (draw it on the graph)? (4) Slope - Business' MRS 100 Iso unit cost, firm's shutdown' condition In this region, the firm shuts down In this region citizens leave town Slope of citizens indifference curves MRS Citizens reservation indifference curve leave town condition Wages 2. What are some factors that could give citizen's more bargaining power? Why would it not be perfect (in other words why would they not have all the bargaining power)? (4) 3. Bonus. What is the economic logic for why w* stays fixed? (Not the mathematical reason). (2) Quality of the environment, E
Question Three. 1. Look at the diagram below. Consider the scenario where citizens have almost all the bargaining power. What will be the equilibrium outcome in this scenario (draw it on the graph)? (4) Slope - Business' MRS 100 Iso unit cost, firm's shutdown' condition In this region, the firm shuts down In this region citizens leave town Slope of citizens indifference curves MRS Citizens reservation indifference curve leave town condition Wages 2. What are some factors that could give citizen's more bargaining power? Why would it not be perfect (in other words why would they not have all the bargaining power)? (4) 3. Bonus. What is the economic logic for why w* stays fixed? (Not the mathematical reason). (2) Quality of the environment, E
Chapter18: Asymmetric Information
Section: Chapter Questions
Problem 18.11P
Related questions
Question
![Question Three.
1. Look at the diagram below. Consider the scenario where citizens have almost all the bargaining
power. What will be the equilibrium outcome in this scenario (draw it on the graph)? (4)
Slope - Business' MRS
100
Iso unit cost, firm's
shutdown' condition
In this region, the firm shuts down
In this region,
citizens leave town
Slope of citizens
indifference curves
- MRS
Citizens' reservation
indifference curve:
leave town condition
Wages
2. What are some factors that could give citizen's more bargaining power? Why would
it not be perfect (in other words why would they not have all the bargaining power)?
(4)
3. Bonus. What is the economic logic for why w* stays fixed? (Not the mathematical
reason). (2)
Quality of the environment, E](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fb3e67188-81f2-439b-abe8-e79f734af3f0%2Faa9a45f1-dde4-406e-a027-fb27bccd7613%2Fhv5tkz_processed.png&w=3840&q=75)
Transcribed Image Text:Question Three.
1. Look at the diagram below. Consider the scenario where citizens have almost all the bargaining
power. What will be the equilibrium outcome in this scenario (draw it on the graph)? (4)
Slope - Business' MRS
100
Iso unit cost, firm's
shutdown' condition
In this region, the firm shuts down
In this region,
citizens leave town
Slope of citizens
indifference curves
- MRS
Citizens' reservation
indifference curve:
leave town condition
Wages
2. What are some factors that could give citizen's more bargaining power? Why would
it not be perfect (in other words why would they not have all the bargaining power)?
(4)
3. Bonus. What is the economic logic for why w* stays fixed? (Not the mathematical
reason). (2)
Quality of the environment, E
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