2.11 An economic consultant explaining the effect on labor demand of increasing health care costs, interviewed for the Wall Street Journal’s Capital column

(David Wessel, “Health-Care Costs Blamed for Hiring Gap,” March 11, 2004, A2), states, “Medical costs are rising more rapidly than anything else in the economy—more than prices, wages or profits.

It isn’t only current medical costs, but also the present value of the stream of endlessly high cost increases that retards hiring.”

a. Why does the present value of the stream of health care costs, and not just the current health care costs, affect a firm’s decision whether to create a new position?

b. Why should an employer discount the future health care costs in its decision whether to create a new position? A