Calculating Weekly Earnings and Opportunity Cost

An employee works 35 hours per week and earns an hourly wage of $12. Assuming she works all her scheduled hours, what are her total weekly earnings?

An employee earns a wage of $12 per hour for a 35-hour workweek. The employer relies on this wage to motivate the employee to provide the expected level of effort. Which of the following external economic changes would most likely reduce the effectiveness of this wage as a motivational tool?

An employee earns $12 per hour for a 35-hour workweek. To keep her job, she must exert a level of effort that she finds disagreeable, equivalent to a cost of $2 per hour. Her next best alternative to this job is to be unemployed and receive a government benefit. Which of the following scenarios would increase the economic rent she receives from her employment?

Employer's Response to Economic Changes

Calculating Net Benefit of Employment

Calculating Total Employment Rent

An employee earns a wage of $12 per hour for a 35-hour workweek. If the employer requires the employee to work 40 hours per week at the same hourly wage, the employee's total economic rent from the job will necessarily increase because her weekly earnings are higher.

Evaluating the Impact of a Universal Basic Income Policy

An employee works 35 hours per week for a wage of $12 per hour. The psychological cost of the effort required is equivalent to $2 per hour. The employee's next best alternative is to be unemployed and receive a benefit equivalent to $6 per hour. The employer introduces a new, more demanding work process, increasing the psychological cost of effort to $3 per hour. To ensure the employee is no worse off than before (i.e., to keep their economic benefit from the job the same), what is the minimum new hourly wage the employer must offer?

Figure 6.8a: Maria’s Next Best Alternative and Total Employment Rent