Microeconomics
21st Edition
ISBN: 9781259915727
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
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Question
Chapter 17.A, Problem 3ARQ
To determine
The basic areas covered in work agreement.
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Suppose an economy consists of a union and a nonunion sector. The labour demand curve in each sector is given by: E= 600 - 15w
where w is the hourly wage and E is the level of employment. The total labour supply is inelastic and equal to 600. Workers are equally skilled and can be employed either in the union or the nonunion sector.
How do you find the competitive wage in this economy?
Look at Figure. In the union sector, the union’s ability to raise wages from Wn to Wu decreases total employment from N1 to N2. Thus N1 − N2 workers are displaced from the union sector and will seek employment in the nonunion sector. But suppose that wages in the nonunion sector cannot fall (perhaps because of a minimum wage law). Suppose, more specifically, that they are fixed at Wn in the nonunion sector. If the union and nonunion sectors are the only two sectors in the economy, how many workers will become unemployed because of the union’s ability to raise wages in the union sector? (Hint: N1 − N2 in the union sector is the same number of workers as N3 − N1 in the nonunion sector.) a. N1 . b. N2 . c. N3 . d. N1 − N2 . e. N1 + N2
Consider an economy that consists of a union and non-union sector. The labour demand in each sector is given by:
E=600-25W
The total supply of labour is 700 workers, and it does not depend upon the wage. Labour and jobs are homogeneous in both sectors.
What is the market-clearing wage if both sectors are competitive? How many workers are employed in both sectors?
Suppose a monopoly union sets the wage at the union sector at £12. How many workers will be employed in the union and nonunion sectors? What wage will the workers in nonunion sector receive?
What is the union wage gap in part (b)? What would the union wage effect be if one controlled for the spillover effect?
Chapter 17 Solutions
Microeconomics
Ch. 17.3 - Prob. 1QQCh. 17.3 - Prob. 2QQCh. 17.3 - Prob. 3QQCh. 17.3 - Prob. 4QQCh. 17.A - Prob. 1ADQCh. 17.A - Prob. 2ADQCh. 17.A - Prob. 3ADQCh. 17.A - Prob. 4ADQCh. 17.A - Prob. 1ARQCh. 17.A - Prob. 2ARQ
Ch. 17.A - Prob. 3ARQCh. 17.A - Prob. 4ARQCh. 17.A - Prob. 1APCh. 17.A - Prob. 2APCh. 17 - Prob. 1DQCh. 17 - Prob. 2DQCh. 17 - Prob. 3DQCh. 17 - Prob. 4DQCh. 17 - Prob. 5DQCh. 17 - Prob. 6DQCh. 17 - Prob. 7DQCh. 17 - Prob. 8DQCh. 17 - Prob. 9DQCh. 17 - Prob. 10DQCh. 17 - Prob. 1RQCh. 17 - Prob. 2RQCh. 17 - Prob. 3RQCh. 17 - Prob. 4RQCh. 17 - Prob. 5RQCh. 17 - Prob. 6RQCh. 17 - Prob. 7RQCh. 17 - Prob. 1PCh. 17 - Prob. 2PCh. 17 - Prob. 3PCh. 17 - Prob. 4PCh. 17 - Prob. 5P
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- Suppose the economy consists of a union and a nonunion sector. The labor demand curve in each sector is given by L = 1,000,000 - 20w. The total (economywide) supply of labor is 1,000,000, and it does not depend upon the wage. All workers are equally skilled and equally suited for work in either sector. A monopoly union sets the wage at $30,000 in the union sector. What is the union wage gap? What is the effect of the union on the wage in the nonunion sector?arrow_forwardAnswer the following questions based on the diagram below, in which Ij and I2 are the indifferent curves of labour union, Tị and n2 are the isoprofit curves, and DL is the labour demand curve. Wc is the wage rate in a perfectly competitive market. I2 Wc DL Qc Quantity of labour Wage ratearrow_forwardConsider the labor market illustrated in the figure to the right. Suppose this market has a unionized sector and a nonunionized sector such that the demand for unionized workers is DU and the demand for nonunionized workers is DNU. Also assume that the supply of unionized and nonunionized labor is fixed at SL. In equilibrium, what is the market wage?arrow_forward
- consider a economy where there is initially no labour unions. When labour unions are introducted, they successfully bargain collective agreements in about half of firms in the economy. using supply and demand curves can you show me how the effects of these unions on wage and employment. Would be helpful if you can provide a graph as well.arrow_forwardSuppose the union's objective is to maximize the wage bill and its marginal rate of substitution between employment and wage is given by MRSL,w- w/L (Note union's indifference curves have negative slope, but this text follows the convention of naming MRS as the absolute value of the slope.) Suppose the product price is $9, the marginal revenue product of labour is given by MRP, = 90-4L, and the wage-employment contract will be determined as in the monopoly union model. The absolute value of the slope of A Using the usual economics axes, graph the demand for labour. The slope of this curve is equal to the demand curve is 8. Write the two equations which a monopoly union's optimal choice must satisty and then solve for the union's ideal outcome. The union's ideal is to choose wage equal to w,s At this wage the firm will hire units of labour. C. The slope of the union's indifference curve is equal to at the union's optimal choice. At this point, the union's marginal rate of substitution…arrow_forwardAssume that the marginal cost of hiring additional labor (MCL), the market supply of labor (SL), and the market demand for labor (DL) are determined by the following equations, where w refers to wage and L refers to labor: MCL: w=2+7L SL: w=2+5L DL: w=42−3L Determine how many workers stay unemployed under a monopsony as compared with a perfectly competitive market, assuming firms want to maximize profits in both situations. Write the exactarrow_forward
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