Problem #3: Labor Unions (20 points)Sarah is thinking if she should join the labor union in their company. Her utility function isU (c, 1) = (cl)05, where c denotes consumption, and I denotes leisure. She has 16 hours eachday to allocate between work and leisure.1. Given her non-labor income is zero, how many hours will Sarah work at $7 wage/hour?In addition, how much consumption and leisure can she afford, and how much utilitycan she achieve from this?2. If the labor unioh bargains for a $10.5 overtime pay rate for work hours beyond 8hours, will Sarah benefit from this proposal?3. If, instead, the labor union proposes an 8-hour workday, will Sarah benefit from it?

Detailed explanation:Question 1: Work and Utility Calculation Sarah has to decide how many hours to…

Answered: Problem #3: Labor Unions (20 points)…

Microeconomics

13th Edition

ISBN:9781337617406

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter13: Factor Markets: With Emphasis On The Labor Market

Section: Chapter Questions

Problem 2WNG

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(Based on Chapter 2, Problem 1 of Benjamin et al., 2031) Amit has $2000 of annual non-labour income. He has 80 hours per week that he can allocate between labour and leisure, for 80 x 52 = 4160 hours per year. His current wage rate is $20 per hour and he chooses to work 2200 hours a year. (a) Draw a leisure - labour diagram, clearly indicating Amit's current labour supply decision. (Your diagram should be clearly labeled and include Amit's budget line and an indifferent curve showing his leisure and consumption of goods and services at his optimal choice. Use the figures provided to find the y-intercept and his consumption if he doesn't work.) (b) Amit's wage rate increases to $25 per hour. In response, he increases his labour supply to 2300 hours. If he were "compensated" accordingly, at this new wage rate he would be just indifferent to working 2200 hours at his original wage rate and working 2400 hours at the new wage. Illustrate Amit's new optimal choice. Use the information…
Edie chooses to work 90 hours per week when the wage rate is $16 per hour. If she is offered time-and-a-half ($24 per hour) for “overtime work” (i.e., hours in excess of 90 per week), will she choose to work longer hours? Support your results with a diagram.
Cindy gains utility from consumption C and leisure L. The most leisure she can consume in any given week is 168 hours. Her utility function is U ( C, L) = C x L. This functional form implies that Cindy’s marginal rate of substitution is C/L. Cindy receives $630 each week from her great-grandmother—regardless of how much Cindy works. What is Cindy’s reservation wage?
Suppose that Linda receives a fixed payment of $50 and consumes 8 hours of leisure. If her total earnings for the entire day is $300, we know her hourly wage rate must be (there are 24 hours in a day)
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Lucille receives an annual salary of $37,500 based on a 37.5-hour workweek. What are her gross earnings for a two-week pay period in which she works 9 hours of overtime at 1 1/2 times her regular rate of pay? (Assume there are exactly 52 weeks in a year. Round your answer to the nearest cent.) Gross earnings =
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Suppose the wage rate for labor is $20 an hour and the rental rate for capital is $50 per hour. Based on this information, please answer the questions appearing below the graph. 80 70 60 50 40 30 20 10 10 20 30 40 50 60 70 80 1,000 cases Labor Draw an (approximate) is-cost line associated with an hourly budget of $1,000. Hint: Find the intercept points first. If you were to shift this line out, what is the approximate least-cost combination of labor and capital when packaging 1,000 cases of fruit juice?
Question 4: The "Slope" story. Gilbert works for a local food company, where he earns w for up to 40 hours of work each week, and then earns 1.5w for any hours worked thereafter (overtime). Lori is an office worker who also earns w for up to 40 hours of work each week. However, Lori does not get any overtime and chooses to work as a delivery worker that pays 0.5w. This means Lori's second job pays an hourly wage that is half less than her primary job. (a) Illustrate the budget line for Gilbert and Lori in one graph. (b) Which person is likely to work up to the point of the "kink" in the graph, and which person is likely to choose a consumption-leisure bundle as far away as possible from the kink?.

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