Above is the Exit, Voice, and Loyalty game between the state (S) and the citizen (C). E is what the citizen gets from her exit option. R is what the state gets from the support (revenue) of the citizen. 0 is what the citizen gets for remaining loyal to the state. c is the cost for the citizen of exercising her voice option.
For the following questions, let R =2. Let c = 0.25.
-Given that the state depends on the citizen in this example (R > 1), to what extent does the citizen's behavior depend on the attractiveness of her exit options?
Definitions:
Indifference Curve
A set of points, each point representing a combination of goods X and Y, all of which yield the same total utility.
Marginal Utility
The supplementary contentment or advantage received from the consumption of one more unit of a product or service.
Total Utility
The total satisfaction received by a consumer from consuming a certain quantity of goods or services.
Labor Supply Curve
A graphical representation showing the relationship between the wage rate and the quantity of labor that workers are willing to offer at different wage rates.
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