Econ 318 Exam 2 (all solved)

Who has a comparative advantage in home production? correct answers The spouse whose opportunity cost (forgone wages) of producing a given commodity (e.g., home cooked dinner) is lowest. Traditional specialization magnifies comparative advantages through correct answers "learning by doing" Still, most couples marry. Why? correct answers Comparative advantages have not disappeared Women earn lower wages than men Women do the lion's share of housework (irrespective of whether they work for a wage) Other economic advantages; Economies of scale: cost of housing, time to prepare a meal Externalities in consumption: going on vacation together, she gets a lovely haircut Marriage specific investments: (skills, knowledge and investments made in the marriage that lose value upon divorce Risk pooling (one member becomes unemployed but the other can support the family) Institutional advantages: health insurance coverage, pension rights, Social Security benefits Disadvantages of specialization: correct answers Sharing of housework: it may be efficient for the husband to do some of the work (car repairs, take out the garbage, drop off kids at school) Life cycle changes: a person's comparative advantage likely changes over time: a woman's comparative advantage peaks while children are small Costs of interdependence: the family is better of if both spouses can earn a wage or become care providers should the need arise Tastes and bargaining power: who consumes what if tastes differ, whose preferences get greater weight? Domestic violence: Homemakers have reduced opportunities for leaving an abusive relationship Why do couples still marry? correct answers Young people expect their marriage to succeed Social pressure to marry and become a traditional housewife Public policies (tax and SS) that encourage one-earner families Typically, the threat point depends on the ________ controlled by each party if they divorce. correct answers Typically, the threat point depends on the income controlled by each party if they divorce. The strong link between marriage, sexual activity and childbearing has become weaker due to increased cohabitation, decreased _________ rates, and increased births to __________ women (from 1 in 10 births in 1970 to 1 in ___ by 2002). correct answers The strong link between marriage, sexual activity and childbearing has become weaker due to increased cohabitation, decreased marriage rates, and increased births to unmarried women (from 1 in 10 births in 1970 to 1 in 3 by 2002).