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)
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)
Chapter11: Labor Markets
Section: Chapter Questions
Problem 1SQ
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Question
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 |
- 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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