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- Other than the demand for labor, what would be another example of a 'derived demand?Will a free market tend to encourage or discourage discrimination? Explain briefly.Suppose that Congress passes a law requiringemployers to provide employees some benefit (suchas healthcare) that raises the cost of an employee by$4 per hour.a. What effect does this employer mandate haveon the demand for labor? (In answering this andthe following questions, be quantitative whenyou can.)b. If employees place a value on this benefit exactlyequal to its cost, what effect does this employermandate have on the supply of labor?c. If the wage can freely adjust to balance supply anddemand, how does this law affect the wage andthe level of employment? Are employers better orworse off? Are employees better or worse off?d. Suppose that, before the mandate, the wage in thismarket was $3 above the minimum wage. In thiscase, how does the employer mandate affect thewage, the level of employment, and the level ofunemployment?e. Now suppose that workers do not value themandated benefit at all. How does this alternativeassumption change your answers to parts(b) and (c)?
- When Alan Greenspan (an economist who wouldlater chair the Federal Reserve) ran a consulting firmin the 1960s, he primarily hired female economists. Heonce told the New York Times, “I always valued menand women equally, and I found that because othersdid not, good women economists were cheaper thanmen.” Is Greenspan’s behavior profit-maximizing? Isit admirable or despicable? If more employers werelike Greenspan, what would happen to the wagedifferential between men and women? Why mightother economic consulting firms at the time not havefollowed Greenspan’s business strategy?A current debate in education is whether teachersshould be paid on a standard pay scale based solelyupon their years of training and teaching experience,or whether part of their salary should be based upontheir performance (called “merit pay”).a. Why might merit pay be desirable?b. Who might be opposed to a system of merit pay?c. What is a potential challenge of merit pay?d. A related issue: Why might a school district decideto pay teachers significantly more than the salariesoffered by surrounding districts?The way the workers’ compensation system works now, employees permanently injured on the jobreceive a payment of $X each year whether they work or not. Suppose the government were toimplement a new program in which those who did not work at all got $0.5X but those who did work got$0.5X plus workers’ compensation of 50 cents for every hour worked (of course, this subsidy would bein addition to the wages paid by their employers). What would be the change in work incentivesassociated with this change in the way workers’ compensation payments are calculated?
- Policymakers sometimes propose laws requiringfirms to give workers certain fringe benefits, such ashealth insurance or paid parental leave. Let’s considerthe effects of such a policy on the labor market.a. Suppose that a law required firms to give eachworker $3 of fringe benefits for every hour that theworker is employed by the firm. How does this lawaffect the marginal profit that a firm earns from eachworker at a given cash wage? How does the lawaffect the demand curve for labor? Draw your answeron a graph with the cash wage on the vertical axis.b. If there is no change in labor supply, how wouldthis law affect employment and wages?c. Why might the labor-supply curve shift inresponse to this law? Would this shift in laborsupply raise or lower the impact of the law onwages and employment?d. As discussed in Chapter 6, minimum-wage lawskeep the wages of some workers, particularlythe unskilled and inexperienced, above theequilibrium level. What effect would a fringebenefit mandate have…The figure depicts the efficiency wage equilibrium of a worker and a firm. According to this figure: Isocosts Worker's best response curve 0.7---- 0.5+ -- 4 6 10 12 Hourly wage, $ At B, the MRS is higher than the MRT. O The firm is able to increase its profits from those attained at A by inducing the worker to exert higher effort in return for a higher wage. O The firm would maximise its profits by paying an hourly wage that is $6 above the worker's reservation wage. O At C, the marginal rate of substitution (MRS) between higher wage cost and higher effort exceeds the marginal rate of transformation (MRT). Effort per hour 近The backward-bending supply curve for labour exists- (A) Only in inflationary conditions doid W (B) Wherever income effect overcomes substitu- tion effect basmob ar C, lagual
- . Contrasting labor union lews in twe states Consider two states that adopt afferent lews concerning labor unions. The following graph shows the lebor market in a state in the North. Initiay, the market-clearing wage there is s8.00 per hour. Suppose that the legislature in this northern state pesses laws that make Reasy for workers to join a union. Through collective bargaining, the union negotiatesa wege of s10.00 per hour. Use the graph input tool te help you answer the following questiens. You wil not be graded on any changes yeu make to thi graph Graph Ingut Tool Market for Labor Wege (Dolars per hour) 2.00 Labor Demanded (Thousand workers 1,400 Labor Suppled (Thosands of workers) 200Explain how the wage can adjust to balance thesupply and demand for labor while simultaneouslyequaling the value of the marginal product oflabor.Why Caltie is evapertant in glehel wopertant in glabal Ma