Econ 318 exam 2 (with answers)

Half of marriages end in divorce, why do people still marry? correct answers - comparative advantages have not disappeared but they have diminished since women are doing better in the labor market. Although, comparative advantage has not gone away completely. It is still true that women on average earn lower wages than men - women do the lions share of housework no matter if she works for wages or not. This gives men an incentive for marriage Other economic advantages: - Economies of scale: increased output at a lower marginal cost. (Cost of housing, time to prepare a meal) Example: it takes the same time to prepare a meal for one to prepare a meal for two or more. With this you're spending the same time preparing the meal for yourself as you would preparing a meal for a family of four - Public goods: consumption by one member does not preclude consumption by another (watching TV, monitored alarm system, nice view of the ocean) Example: watching TV as a family and your enjoyment of what you're watching is not diminished by the person sitting next to you. And if anything it enhances your enjoyment - Externalities in consumption: consumption by one enhances the well being of the other) Example: going on vacation together Other example: when enjoying TV together it enhances your benefits bc y'all are enjoying each others time - Marriage specific investments: skills, knowledge and investments made in the marriage that lose value upon divorce Example: learning to prepare the others favorite dessert, rearing of children - 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 (mostly for women) correct answers Sharing of housework: it may be efficient for the husband to do some of the work (car repairs, takeout the garbage, drop off kids at school) - something has to give though, women usually give up their career partly or fully Life cycle changes: a persons comparative advantage likely changes over time - now that the kids are older the women can finally focus on their career but they are behind now, your skills depreciate and careers change