Jen is offered a job answering the phone in the State U economics department during lunchtime, from noon to 1 p.m., Tuesdays and Thursdays. Her reservation wage for this job is $15 per hour. Now suppose the department chair announces that the $150 per week earnings from the job will be divided equally among Jen and 299 other students in the department. How much economic surplus will Jen enjoy each week if she accepts the job?

Question

Quizplus · Accepted Answer

If the $150 per week were divided equally among 300 students, each would only receive $0.50 per week. Given that her reservation wage is $30 per week, accepting the job would mean an economic surplus of -$29.50.

Jen Is Offered a Job Answering the Phone in the State