Lerato is working at the IEC as an election official. Lerato works for 35 hours per week and earns a wage of $75 per hour for her work. Lerato exerts an effort level of 0.6, which translates to a disutility of effort of $35 per hour. If Lerato were to lose her job today, she would be eligible for a lump-sum severance package of $11 200, which would be the only money Lerato could get in over the 8 weeks it would take her to find a new job. Furthermore, Lerato is not very outgoing, so she knows that if she loses her job, the stress of needing to prepare for potential interviews will levy a psychological cost on her equivalent to $15 per hour.

1. Calculate Leratos average net unemployment benefits.

2. Using a diagram, depict Leratos unemployment rent graphically. Make sure to label your diagram fully.

3. Calculate Leratos total employment rent. Show your working.

4. In the build-up to election day, Lerato is finding her job more demanding than normal. Imagine that as a result, she approaches her bosses at the IEC with a proposal: Lerato would like to get a raise so that she earns R90 per hour, and in exchange she will exert an effort level of 0.8. Would the IEC accept this offer? Explain your answer briefly.

5. The IEC is concerned about the state of preparation for the local government elections, and so they hire a number of floor supervisors in order to monitor election officials like Lerato more closely and ensure that their work is done to the correct standard. Using the labour-discipline model, briefly describe how this will affect Leratos equilibrium effort levels and wages.