Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

3. (8 Points) Tied Movers and Stayers Two single, eternally lived individuals who discount the future at 10% per year have just graduated from college

image text in transcribed
3. (8 Points) Tied Movers and Stayers Two single, eternally lived individuals who discount the future at 10% per year have just graduated from college in their home state of Pennsylvania. Assume that they both maximize the lifetime present value of individual income net of mobility cost if single, and of total household income net of mobility cost if married. Rachel has a job offer in Pennsylvania that pays $60 thousand per year, and a job offer in Florida that pays $90 thousand per year. Patrick has a job offer in Pennsylvania that pays $90 thousand per year, and a job offer in Florida that pays $70 thousand per year. Rachel's mobility cost is MR 2 0 and Patrick's mobility cost is Mp 2 0. a) (4 points) Suppose that if Rachel remained single that she would choose to move to Florida. Find the upper bound on MR. For example, could MR be as high as $100,000? As high as $400,000? b) (4 points) Let Rachel and Patrick marry. Show the conditions under which Patrick will be a tied mover and the conditions under which Rachel will be a tied stayer

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Environmental Markets A Property Rights Approach

Authors: Terry L Anderson, Gary D Libecap

1st Edition

0521279658, 9780521279659

More Books

Students also viewed these Economics questions

Question

6. How can a message directly influence the interpreter?

Answered: 1 week ago