1. Assumptions of the Labour-Discipline Model As in all economic models, our simplified representation of Maria's employment rent has deliberately omitted some aspects of the problem that might be important. For example, we have assumed that: . Maria finds a job with the same pay after her spell of unemployment. . She does not experience any psychological or social costs from being unemployed. Redraw Figure 6.2 (Lecture Slide 17) to show how relaxing each of these assumptions would alter the employment rent. Specifically, assume: . Maria can only find a job with the lower pay of $6 per hour after her spell of unemployment. . She experiences a psychological cost of being unemployed of $1 per hour. When unemployed, she gains $2 per hour because there is no longer the disutility of working so the net gain is $1.Hourly .... 12 wage Maria's rent when employed Employment rent per hour 8 Disutility of effort when employed Hourly wages ($) 6 What Maria receives in unemployment benefit during Reservation her period of unemployment wage per hour 0 44 Number of 35-hour weeks Expected duration of unemployment (1,540 hours) coreecon