6. Answer one of the two following questions. a. What is the Law of One Price? Does it hold in labor markets? State at least 3 frictions in the support of yowr answer. [6] b. Uber is trying to recruit more drivers. They are promising, to any driver that completes at least 30 rides in a month, minimum guaranteed earnings of $1200. For example, if you drive 50 rices and those rides pay, say $10 each. with $2 each in tips, vou'd earn $600. Uber will pay vou the extra 3600 when yvou complete that 50'" ride, to reach that $1200. Draw the budget constraint that Uber is setting up for its drivers. How will the drivers respond to this incentive? Feel free to make any assumption you'd like to answer this question, but make sure to state those assumptions. [6] c. Briefly describe the work that earned Claudia Goldin the 2023 Nobel. [6] - 7. Sophia, a high school student lives with her parents in Denver, CO. She currently has a job that pays $12 an hour and she receives $10 per week from her parents. Her parents are considering a move to Dallas, TX because of a promotion which will increase their annual income. Searching online for jobs in Dallas Sophia discovers that the only job she can find pays $8 and hour. Because her parents will earn more in Dallas they offer to raise Sophia's weekly allowance to $80. a. On a carefully labeled diagram, illustrate and explain the change to Sophia's budget constraint resulting from the move to Dallas. (Assume that Sophia has 60 hours per week to allocate between work and leisure.) (6] b. Making reference to income and substitution effects discuss the changes in work incentives associated with the move to Dallas. Does it matter whether Sophia was working part-time or full-time at her job in Denver? [{| c. Their parents reconsider: instead of increasing her weekly allowance, they propose paying her $6 an hour for every hour she works, up to $10. They want to cover the difference between the Denver and the Dallas wages, but are only willing to pay $40. How does this change Sophia's budget constraint? Would she like this idea? [5]