A firm finds the following relationship between the amount that workers lose if

Question

A firm finds the following relationship between the amount that workers lose if they are fired and worker

A firm finds the following relationship between the amount that workers lose if they are fired and worker's productivity Workers are paid $500 per week at other firms and all jobs last 50 weeks If there is no unemployment , so workers can find jobs instantly at other firms, how much will this firm pay its workers How many weeks of job search are needed so that this firm will pay its workers no more than they could get at other jobs What is the natural rate of unemployment in this labor market if all firms are in the same situation PlePlease show your work

Explanation / Answer

a)If there is no unemployment, so he can get maximum improvement in productivity of $5500. So $4000 is paid to workers

b) no of weeks needed forjob search so that this firm will pay its workers no more than they could get at other jobs

= $4000/wage paid by other companies

=4000/500 = 8 weeks

c)natural rate of unemployment in this labor market if all firms are in the same situation = 50 weeks (As
all jobs last 50 weeks)

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