Suppose that Congress passes a law requiring employers to provide employees some benefit (such as healthcare) that raises the cost of an employee by $3 per hour. Assume that firms were not providing such benefits prior to the legislation. On the following graph, use the green line (triangle symbol) to show the effect this employer mandate has on the demand for labor. Wage (Dollars per hour) 8 18 16 14 12 10 40 2 0 Demand 1 2 3 4 5 6 7 8 Quantity of Labor (Thousands) Supply 10 True Suppose employees place a value on this benefit exactly equal to its cost. New Demand True or False: Employers and employees are made worse off by this law. New Supply Equilibrium Before Law Equilibrium After Law On the previous graph, use the purple line (diamond symbol) to show the effect this employer mandate has on the supply of labor. Suppose the wage is free to balance supply and demand. Use the black point (plus symbol) to indicate the equilibrium wage and level of employment before this law, and use the grey point (star symbol) to indicate the equilibrium wage and level of employment after this law is implemented.

RATE 4. Excess supply with union wages Consider the housing construction industry. Assume that the industry is perfectly competitive in both input and output markets. Suppose that, through collective bargaining, a labor union negotiates an industry-wide wage for various kinds of labor (electricians, plumbers, and so on). In particular, it succeeds in negotiating a wage increase for carpenters from $30 to $40 per hour. The following graph shows the labor demand of an individual firm. On the following graph, show what happens at the firm level as a result of the union negotiations. 10 20 50 24 72 QUANTITY OF LABOR Demand 120 Demand Supply Supply Now consider the effects of the wage change on the entire industry. Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph. Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly. WAGE RATE (Dollars…

3. Union and Labor Market Efficiency (a) Given an inverse labor demand function of w = 30 - 0.02LD, find the elasticity of labor demand when w = 10. Does the firm pay out more to its workers by increasing wages?

The table below describes labor supply and labor demand schedules. Wage $15 $16 Labor supply 400 workers 500 workers 600 workers $17 $18 $19 $20 $21 Find the equilibrium amount of employment in this market. Type your answer.... 700 workers 800 workers 900 workers 1,000 workers Labor demand 1,000 workers 900 workers 800 workers 700 workers 600 workers 500 workers 400 workers Next