The average expected marginal benefit from searching for a job for one more day is MB = 500 0.75D, where D is the number of days a worker spends looking for a job before a job offer is accepted. The average marginal cost of looking for a job is MC = 350 per day. The unemployment incidence (the proportion of the workers who lose their jobs in any given week) is 1% per week.

• What is the average duration of unemployment in equilibrium? Give the number and show how you got it. (2)
• What is the equilibrium unemployment rate? Give the number and show how you got it. (3)
• The EI program is introduced that pays $250 a day to an unemployed worker for the first 225 days of unemployment duration (effectively reducing the typical marginal cost of looking for a job to MC = 100 per day) and nothing after 225 days. What is the equilibrium unemployment rate? Give the number and show how you got it