According to the two-sided search model, in equilibrium the number of firms is
A)positively related to the cost of posting a vacancy.
B)the firm's share of the total surplus from a match.
C)negatively related to the cost of posting a vacancy.
D)negatively related to the productivity of a match.
E)positively related to the level of employment insurance benefits.

Question

Quizplus · Accepted Answer

In the two-sided search model, the cost of posting a vacancy represents the fixed cost of entering the market. A higher fixed cost will deter some firms from entering the market, reducing the equilibrium number of firms. Therefore, the number of firms is negatively related to the cost of posting a vacancy.

According to the Two-Sided Search Model, in Equilibrium the Number