Macroeconomics 1st Edition by Dean Karlan,Jonathan Morduch

Exercise 17

An employee asks her boss whether she can transfer offices, so that she can work in a different part of the country. The boss responds positively and says that the employee can choose to work in Cleveland, Miami, or New York City. The boss then hands the employee a list, as shown in Table 8P-9 , of the salaries that she would earn in the different cities and the average price levels in those same cities.
a. From a standpoint of maximizing the employee's consumption possibilities, which office should she choose?
b. What would be the minimum salary in New York City the boss could offer the employee to make the employee indifferent between moving to Cleveland and to New York City?