+ = what Maria gets should she not lose her job today Hourly wage = $12 Hourly wages ($) Number of 35-hour weeks Maria's wage Maria's hourly wage, after taxes and other deductions, is $12. Looking ahead from now (taken as time 0), she will continue to receive this wage for the foreseeable future if she keeps herjob, indicated by the horizontal line at the top of the figure. Figure 6.2 Maria's employment rent for a given effort and $12 wage in an economy without an unemployment benefit. EXERCISE 6.3 ASSUMPTIONS OF THE 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: 0 Maria finds a job with the same pay after her spell of unemployment. 0 She does not experience any psychological or social costs from being unemployed. Redraw gure 6.2 to show how relaxing each of these assumptions would alter the employment rent. Specifically, assume: 0 Maria can only find a job with the lower pay of $6 per hour after her spell of unemployment. 0 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. The revised graph is as below: Wage rate R Number of hours