Household labor. (Adapted from Ehrenberg & Smith). Company P routinely hires skilled technicians on one-year contracts to work in remote locations. It o ers a $20,000 signing bonus and an hourly wage of $30 per hour. Company S now enters the market and o ers no singing bonus, but o ers an hourly wage of $40 per hour. Company U pays $35 per hour for the rst 2,000 hours of employment, but then $40 per hour after that. All companies want employees who work more than 2,000 hours in a year (out of 4,000 possible).
(a) First, suppose that a worker receives an off er from all three companies; on the same graph, draw the income-household time (''''budget") constraint for the coming year under both o ffers. (Clearly label each company with di erent colors and an actual label).
(b) Second, consider a worker for Company P who chose to work 3,000 hours last year. Suppose the contract is up and that she now has off ers from Company S and U. Describe the conditions under which she would continue to work 3,000 hours, increase hours, and decrease hours worked.