Refer to Figure 8.1. The profit-maximizing output is

If the amount paid as unemployment benefits decreases, the opportunity cost of job search

A) falls and people stay unemployed for a shorter time. B) rises and people would stay unemployed longer. C) rises and people stay unemployed for a shorter time. D) falls and people stay unemployed for a longer time. E) is not affected because unemployment benefits do not change job availability.

Consider two lottery winners, Tino who is 65 years old and Sasha who is 32 years old. Which of these two would be expected to have the larger income effect, all else equal?

A) Sasha B) Tino C) Both would have no income effect. D) Both would have equal income effects.