7. Sue is offered a job reshelving books in the University of Montana library from noon until...

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7. Sue is offered a job reshelving books in the University of Montana library from noon until 1 p.m. each Friday. Her reservation wage for this task is $10 per hour. LO4

a. If the library director offers Sue $100 per hour, how much economic surplus will she enjoy as a result of accepting the job?

b. Now suppose the library director announces that the earnings from the job will be divided equally among the 400 students who live in Sue’s dormitory. Will Sue still accept?

c. Explain how your answers to parts a and b illustrate one of the incentive problems inherent in income redistribution programs.

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