LABOR ECONOMICS
8th Edition
ISBN: 9781260004724
Author: BORJAS
Publisher: RENT MCG
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Question
Chapter 12, Problem 7P
To determine
Explain the effect of the proposed legislation on the wage and
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(Problem 1, Page 437) A firm identifies the following relationship between the
real wage it pays and the effort exerted by its workers:
Real Wage
8
10
12
14
16
18
The marginal product of labor for this firm is
MPN = E(100-N)/15
Effort
7
10
15
17
19
20
where E is the effort level and N is the number of workers employed. If the
firm can pay only one of the six wage levels shown, which should it choose?
How many workers will it employ?
There are 200 workers in the town where the firm is located, all willing to
work at a real wage of 8. Does this fact change your answer to the first part of
this question? If so, how?
Suppose that a labor economist performs a statistical analysis on economywide worker wages using standard, measurable explanatory factors, such as
job characteristics, years of schooling, and so forth.
How much of the variation in worker wages can be accounted for by such measurable explanatory factors?
Somewhat more than 60%
Nearly 100%
Somewhat less than 50%
About 0%
Which of the following factors are typically omitted from the quantitative analysis of wages but can help explain otherwise unaccounted-for
disparities? Check all that apply.
Chance
Attractiveness
Natural ability
Effort
Race
O O
O O
See the labor market graph directly below. If there is a sticky wage of $20, what is the unemployment rate in
this labor market?
20
on
16
16
12
A Labor Market
160
15.00%
8.57%
9.38%
>0%
10.00%
16.00%
Although the graph does
not present complete
labels, standard labor
market labels apply.
Note: graph is not to
scale.
175
(millions)
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