According to the Two-Sided Search Model, in Equilibrium Labour Market

question 28

Multiple Choice

According to the two-sided search model, in equilibrium labour market tightness tends to be high when

• A) the cost of a vacancy is high relative to the firm's share of the surplus.
• B) employment insurance benefits are high relative to the productivity of a match.
• C) profits are close to zero.
• D) the firm's share of the surplus is high relative to the cost of a vacancy.
• E) the firm's share of the surplus is increasing in market tightness.

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Definitions:

Marginal Cost

The incremental expense incurred from the production of an extra unit of a good or service.

Maximum Profit

The highest possible financial gain achievable by a firm from its operations, over a certain period of time.

Demand Schedule

A chart displaying the amount of a product or service that buyers are prepared and capable of buying at different price levels.

Marginal Cost

The cost added by producing one additional unit of a product or service, a key factor in economic decision-making.