Exploring Economics
8th Edition
ISBN: 9781544336329
Author: Robert L. Sexton
Publisher: SAGE Publications, Inc
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Chapter 16, Problem 5P
To determine
To explain:
The impact on the equilibrium wage if on the job training and free insurance is given to the workers. The effect on the on the job training and health insurance if a certain minimum wage is made mandatory by the government.
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Question Two
A coal-mining company is the only employer in town, and faces this supply curve for labor:
W = 48 + ( 72/2000 )L
where w is the daily wage, in dollars, and L is the number of workers employed. The company faces this demand curve for coal:
P = 60 − ( 9/ 4000 )Q
where p is the price of coal, per ton, and Q is the number of tons sold per day. Coalminers produce 8 tons of coal each, per day, regardless of the number hired. The mining company maximizes profit.
a) How many workers will be hired, and how much profit will be made?
b) Suppose a union is formed, which sets a wage of $120 per day. At this wage, according to the supply curve given above, 2000 miners are willing to work, and the company is free to hire as many of these as it wants. How many will be hired, and how much profit will be made?
Suppose that Congress passes a law which requires employers to provide employees
some healthcare benefits that raises the cost to the employers by $5 per hour.
a) What is the impact on the demand for labor? (Think quantitatively)
b) If the employees value the benefit exactly equal to the cost, what will be the
impact on the supply of labor?
c) How will the law affect the wage and level of employment? Are the employers
better off or worse off? Are the employees better off or worse off?
d) Suppose before the implementation of the law, the wage in the market was $3
above the minimum wage. In this case, how the law will affect the wage and
level of employment?
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