A firm finds the following relationship between workers’ productivity and the amount that workers lose if they are fired. Workers are paid $500 per week at other firms and all jobs last 50 weeks. Dollars lost by workers as a result of being fired Improvement in productivity because workers work harder to avoid losing their jobs (extra dollars to profit to firm) 1,250 1,750 1,750 2,750 2,000 3,500 2,500 4,500 3,250 4,750 Dollars lost by workers Pain for workers lost if they do not have Improvement in productivity →B B-C= Profit Total: Loss of due to waiting Total Weekly amount (C) Total Weekly (b) Profit (b-c) 1,250 0 1250 1250/50=25 1,750 1,750/50=35 10 1,750 0 1750 1750/50=35 2,750 2,750/50=55 20 2,000 0 2000 2000/50=40 3,500 3,500/50=70 30 2,500 0 2500 3500/50=50 4,500 4,500/50=90 40 3,250 0 3250 32500/50= 65 4,750 4,750/50= 95 30 If workers need to wait one week if they are fired, how much will this firm pay its workers? Construct a table to justify your answer. How many weeks of job search are needed so that this firm will pay its workers no more than they could get at other firms? What is the natural rate of unemployment in this labor market if all firms are in the same situation?
A firm finds the following relationship between workers’ productivity and the amount that workers lose if they are fired. Workers are paid $500 per week at other firms and all jobs last 50 weeks.
|
Dollars lost by workers as a result of being fired |
Improvement in productivity because workers work harder to avoid losing their jobs (extra dollars to profit to firm) |
|
1,250 |
1,750 |
|
1,750 |
2,750 |
|
2,000 |
3,500 |
|
2,500 |
4,500 |
|
3,250 |
4,750 |
|
Dollars lost by workers |
Pain for workers lost if they do not have |
Improvement in productivity |
→B |
B-C= Profit |
||
|
Total: |
Loss of due to waiting |
Total |
Weekly amount (C) |
Total |
Weekly (b) |
Profit (b-c) |
|
1,250 |
0 |
1250 |
1250/50=25 |
1,750 |
1,750/50=35 |
10 |
|
1,750 |
0 |
1750 |
1750/50=35 |
2,750 |
2,750/50=55 |
20 |
|
2,000 |
0 |
2000 |
2000/50=40 |
3,500 |
3,500/50=70 |
30 |
|
2,500 |
0 |
2500 |
3500/50=50 |
4,500 |
4,500/50=90 |
40 |
|
3,250 |
0 |
3250 |
32500/50= 65 |
4,750 |
4,750/50= 95 |
30 |
- If workers need to wait one week if they are fired, how much will this firm pay its workers? Construct a table to justify your answer.
- How many weeks of job search are needed so that this firm will pay its workers no more than they could get at other firms?
- What is the natural rate of
unemployment in this labor market if all firms are in the same situation?
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