Consider a household consisting of four college friends. The friends have committed to live together for the

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Consider a household consisting of four college friends. The friends have committed to live together for the next five years. Presently they live in Milwaukee where Abby will earn \($200,000,\) Bonnie will earn \($120,000,\) Cathy will earn \($315,000,\) and Donna will earn \($150,000\) over the next five years. They have the option of moving to Miami. Moving to Miami would impose a one-time moving cost of \($5,000\) on each person. If they move to Miami, however, Abby will earn \($180,000,\) Bonnie will earn \($150,000,\) Cathy will earn \($300,000,\) and Donna will earn \($100,000\) over the next five years. Moreover, each friend prefers to live in Miami over Milwaukee. In particular, Abby and Bonnie both value the quality of life in Miami versus Milwaukee over the next five years at \($40,000\) while Cathy and Donna place the value at \($25,000\) each. Should the household move to Miami or stay in Milwaukee? Is anyone a tied-mover or a tied-stayer?

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Labor Economics

ISBN: 9781260565522

8th Edition

Authors: George Borjas

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