1. Suppose you are having a conversation with an out-of-work friend. "Maybe you are setting your sights too high," you remark condescendingly before asking them, "Why did you quit your old job before you had a new one lined up?" Explain how your friend may respond to you, assuming their behaviour is optimal given a labour market environment such as the one described in the notes.
2. In the one-sided search model, suppose there are two kinds of works in the population, type h and type l. These two types of workers are identical, but when type h workers are unemployed, they receive more utility from unemployment than type l workers do, even though both types of workers receive the same EI benefits. Which type has the higher unemployment rate, and which type tends to be employed in higher-wage jobs? Briefly explain your answer.