Relative to your reservation wage at the time you accept


Reservation wages

In the mid-1980s, a famous supermodel once said that she would not get out of bed for less than $10,000 (presumably per day).

a. What is your own reservation wage?

b. Did your first job pay more than your reservation wage at the time?

c. Relative to your reservation wage at the time you accept each job, which job pays more: your first one or the one you expect to have in 10 years?

d. Explain your answers to parts (a) through (c) in terms of the efficiency wage theory.

e. Part of the policy response to the crisis was to extend the length of time workers could receive unemployment benefits. How would this affect reservation wages if this change was made permanent?

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Microeconomics: Relative to your reservation wage at the time you accept
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