A labor contract provides for a first-year wage of $10 per hour, and specifies that the real wage will rise by 3 percent in the second year of the contract. The CPI is 1.00 in the first year and 1.07 in the second year. What dollar wage must be paid in the second year?

Mika borrows $100,000 to start up her own beauty shop. She pays 5 percent interest on her loan. In order to account for all costs of her business, Mika must not forget:

A. the implicit cost of $100,000. B. the implicit cost of $5,000. C. the explicit cost of $105,000. D. the explicit cost of $5,000.

Each of the following is a challenge that society's would face in trying to use the second welfare theorem to achieve equity without sacrificing efficiency EXCEPT:

A. endowments aren't always easily observable. B. wealth isn't an endowment. C. lump-sum transfers distort choices. D. transfers based on wealth aren't lump-sum transfers.