Question: A new public works project requires 200 000 hours of labor

A new public works project requires 200,000 hours of labor to complete.
a. Suppose the labor market is perfectly competitive and the market wage is $15. What is the opportunity cost of the labor employed for the project?
b. Suppose that there is currently unemployment among workers, and that there are some workers who would willingly work for $10 per hour. What is the opportunity cost of the labor employed? Does this vary depending on the fraction of would-be unemployed workers hired for the project?
c. If your answers to 1a and 1b differ, explain why.

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  • CreatedApril 25, 2015
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