LABOR ECONOMICS
8th Edition
ISBN: 9781260004724
Author: BORJAS
Publisher: RENT MCG
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Question
Chapter 11, Problem 9RQ
To determine
Reason for fixing efficiency wage rate above the competitive level.
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- Jane is a busy woman. She left her former job to start her own consulting company. She assesses that demand for her services would increase if she lowered her hourly price P: demand for her services is about Q = 200 - P (where Q is the number of hours her services are demanded). She has to pay $10 in liability insurance for every hour she works for herself. She also has a part-time job at her former employer’s for $80 an hour, for as much time as she can spare. She is only physically able to work for 70 hours a week (so she could never get an MBA). How many hours a week does she work for herself? How does your answer change if Jane can only work 50 hours a week?arrow_forwardIf the competition in the market increases: A) The price setting curve shifts downward B) The wage setting curve shifts upward C) The wage setting curve shifts downward D) The price setting curve shifts upwardarrow_forwardThe equilibrium wage rate in an industry is determined by a) whether workers or management are better at negotiating. b) finding where the market supply curve indicates that the substitution effect and income effect of a wage increase are offsetting. c) the strength of the substitution effect relative to the elasticity of demand for labor. d) the intersection of the market demand curve for labor and the market supply curve for labor.arrow_forward
- Suppose that the price of the product remains at $2 and the wage at $13, but that there is a technological breakthrough that increases output by 25 percent for any given level of labor. Find the new profit maximizing L.arrow_forwardGive typing answer with explanation and conclusion For a long time, your firm has been paying its workers a wage of $20 per hour, and your employees have been happy to work 40 hours per week at this wage. Business is suddenly booming, and your firm would really like your workers to agree to a 50-hour work week to meet this new demand for your product. You are considering two strategies. Under the first, you would raise the wage for all hours worked from $20 per hour to $22 per hour; under the second, you would leave the wage for the first 40 hours per week at $20 but offer $30 per hour for hours worked above 40 hours (that is, you would offer time-and-a-half for overtime). Both strategies have the same cost of $1,100 if a worker chooses to work 50 hours. Which strategy is more likely to lead your employees to agree to a 50-hour work week?arrow_forwardAssume that the supply of electrical technicians is low so a firm hires a group of them at $18 per hour. Two years later, due to a recession, the supply of technicians is high so the market rate for them is now $15 per hour. Should the firm pay new hires $18 or $15? Given that the firm bases pay on supply and demand, should it lower the pay of existing mechanics to $15arrow_forward
- Question 3 of 20 Total revenue is best described as the change in revenue when one additional worker is hired. variable cost per unit times the number of units sold. price per unit times the number of units sold. what economists assume firms seek to maximize. Suppose that the price of a coffee table is $85/table. Jim-Bob will sell 100 coffee tables at the flea market this month. It costs Jim-Bob $50 in materials and supplies to make each coffee table and $150/month to rent space at the flea market. These are all of Jim-Bob's costs. How much will Jim-Bob make in total revenue this month? Do not round your answer. $ How much profit will Jim-Bob make at the flea market this month? Do not round your answer. $arrow_forwardExplain why the competitive output maximizes welfarearrow_forwardSuppose that there is an excess supply of economics professors. Should universities necessarily reduce salaries? What does standard economic theory suggest? What does efficiency-wage theory suggest (Explain with diagram)arrow_forward
- If labor supply of unskilled workers is perfectly elastic, then a) the labor supply curve of unskilled workers is horizontal at the market-clearing wage. b) the labor supply curve of unskilled workers is vertical at the total number of unskilled workers in the market. c) firms face an increasing marginal cost of hiring unskilled labor. d) workers will supply more hours of labor to the market when wages increase. c) firms face a horizontal value of marginal product of employment curve.arrow_forwardYou are the manager of a train company. Recently total sales have been a bit low and you are now considering means to give sales a boost. Market research has shown that currently the price of train tickets is historically low. Market research has also shown that the demand curve for train tickets is downward sloping. You may assume that your company is not a price taker on the market. (Draw pictures to support explanation) a) One of your colleagues has suggested that it is important to lower the price of train tickets. In that case, she argues, the demand will increase. Do you agree with her? Explain why. b) She continues her argument by concluding that if the demand goes up, the total value of sales of train tickets should therefore increase. Do you agree with her? Explain why.arrow_forwardUse the concept of diminishing marginal utility to explain the slope of a demand function. Use the concept of diminishing marginal productivity to explain the slope of a supply function.arrow_forward
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