Microeconomics (2nd Edition) (Pearson Series in Economics)
2nd Edition
ISBN: 9780134492049
Author: Daron Acemoglu, David Laibson, John List
Publisher: PEARSON
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Question
Chapter 18, Problem 11P
To determine
Influence of an information cascade in hiring new employees.
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Historically, employers have tended to
lay-off workers
during economic downturns.
According to a survey conducted by Yale economist Truman Bewley, which of the following help to explain this phenomenon? Check all that apply.
Employers believe that they are not legally able to reduce wages.
Even during severe recessions, most workers are able to keep their jobs, and so would rather see a few of their fellow workers laid off
than take a pay cut themselves.
Employers are fearful of renegotiating contracts because of threats from union officials.
What is the major policy implication of this phenomenon?
When the economy is experiencing a contraction, it causes the aggregate supply curve to shift to the right, returning the economy to
potential output on its own.
When the economy is experiencing a contraction, it tends to require an increase in aggregate demand to return to potential output.
Long-term contracts limit wage flexibility, and most economists agree that they are therefore…
You are HR director for a growing architecture firm in Fort Lauderdale, Florida, which currently has need of drafting 20 blueprints every hour. Each of your company’s architects can create on average four blueprints per hour. You are considering hiring four drafters to shoulder the load; each drafter is slower than the architects and can create on average only two blueprints per hour. You scan the current wages in the Ft. Lauderdale area (https://www.bls.gov/oes/current/oessrcma.htm) and notice that the architects in your company earn the local occupational median wage of $30.14 per hour, but that the prospective four drafters will likely each want to get paid their local occupational median wage of $23.52 per hour.
a. Would your company save money in the creation of the 20 blueprints by hiring the four new drafters and firing some architects?
b. The Bureau of Labor Statistics projects that employment of drafters over the next decade will drop by 1.2%, compared to an increase of…
According to the Economics Policy Institute (Mishel and Wolfe, 2019) CEO pay has grown 940% since 1978 while the compensation of the average worker has only risen 12%. While you can easily find sources that provide statistics that conflict with these numbers, you would be hard pressed to find any credible source that refutes the idea that the rate of pay of CEO’s and other upper-level managers has not dramatically increased relative to an organization’s lower-level employees in just about any 10 or more year period over the past 60 years.
In the world of Adam Smith, the “invisible hand” of the free market capitalistic model would address inequities/out of balances. Are the forces represented by the “invisible hand” working? Why or why not?
Is there an ethical dimension to the discussion of upper-level manager compensation? Why or why not?
How does (or does it?) levels of pay of upper management impact the rest of us commoners?
Chapter 18 Solutions
Microeconomics (2nd Edition) (Pearson Series in Economics)
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