In 2002, a French law went into effect that cut the standard
workweek from 39 to 35 hours. The wage rate was adjusted so that
workers got paid for 39 hours even though they worked 35. At the
same time, the new law prohibited workers from working overtime
hours. Prior to the change in the law, overtime in France was paid
at 75 percent above the normal wage rate.
a) Using a solid line, draw the old budget constraint, showing
the overtime premium after 39 hours of work. Label the diagram as
b) In the same diagram, using a dashed line, draw the new budget
c) Analyze which workers in France are better off under the 2002
law. Are any worse off? Explain.