Compensation scheme-terms of budget constraint

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Reference no: EM131241594

Your employer decides to institute a new compensation scheme next year. They will pay you $25,000 no matter how much you work. However, since they employ nothing but workers who earn at least double the minimum wage, they will cut wages by 50%.

a. Draw this in terms of a budget constraint (what does it look like?).

b. What will this new compensation scheme do in terms of work effort (such as hours worked per year for the company)?

Reference no: EM131241594

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