Consider the following situation. A couple, who recently as twins, makes two claims for parental leave. The husband makes a claim for the birth of one twin. The wife makes her claim for the birth of the other twin. As the head of Employment Insurance in Canada, would you allow either or both of these claims? Discuss your reasoning.

Assume that 2 municipalities (in the same province) have different demand curves for firefighters and can hire firefighters at the same constant marginal cost.

a) Draw diagrams illustrating the demand curves and how many firefighters would be hired by each of the two municipalities,

b) As a result of amalgamation, assume that each of the two municipalities is required to hire the same number of firefighters, and that the number hired in each municipality is the average of the number hired before amalgamation. Show the loss in welfare resulting from the requirement that the two municipalities hire the same number of firefighters.

c) Show how the magnitude of the welfare loss may be affected by the elasticity of the demand curves in the two municipalities.