Boardman
Chapter 4 Problem 4
4. First, compute cost to the government of the project. The rest of the
problem is asking you to consider the true (opportunity cost) of the project
when there is a labor market distortion (i.e., unemployment).
a. In order to generate the list of opportunity costs, create a column of 100
numbers with the formula:
=2 + 18*rand()
Click on the thumbnail (ignore the "paste" box for now)
b. What is the sum of the opportunity costs for the 20 lowest cost workers?
- Sort the opportunity costs. In order to fix the numbers [randu() will
recalculate everytime you touch it], copy and paste the column as values
(this will strip the formula from the numbers). Click on "edit" then "copy."
Click on "edit" then "paste special." Highlight the "values" button then
click "OK." Sort the data by clicking on "Data" then "sort." Then sort
"ascending."
c. Skip this one ...
d. How many unemployed workers will line up to work at $12 per hour?
- Add a column of quantities to the left of the opportunity costs (1, 2,
...). Plot the labor supply curve with a scatter diagram. Add a line
representing the project wage of 12 and the number of workers who will line
up (refer back to the earlier spreadsheet
to see how to plot these lines)
e. At a wage rate of $12, is the project cost minimized? Why or why not?
