Labor Economics
7th Edition
ISBN: 9780078021886
Author: George J Borjas
Publisher: McGraw-Hill Education
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Chapter 3, Problem 6RQ
To determine
Explain the factor that determines the elasticity of the industry’s labor
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A firm’s technology requires it to combine 5 person-hours of labor with 3 machinehours to produce 1 unit of output. The firm has 15 machines in place and the wage rate rises from $10 per hour to $20 per hour. What is the firm’s short-run elasticity of labor demand?
A firm faces a perfectly elastic demand for its output at a price of $6 per unit of output. The firm, however, faces an upward-sloped labor supply curve ofE = 20w - 120where E is the number of workers hired each hour and w is the hourly wage rate. Thus, the firm faces an upward-sloped marginal cost of labor curve ofMCE = 6 + 0.1EEach hour of labor produces five units of output. How many workers should the firm hire each hour to maximize profits? What wage will the firm pay? What are the firm’s hourly profits?
Explain the relationship between the own-wage elasticity of labor demand and
output demand elasticity.
labour costs as a share of total costs of production.
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- Labor demand In the long-run:describe what a firm will do when its long-run condition is not met, i.e, when will it hire more or less labor?arrow_forwardSuppose a firm purchases labor in a competitive labor market and sells its product in a competitive product market. The firm’s elasticity of demand for labor is -0.4. Suppose the wage increases by 5 percent. What will happen to the number of workers hired by the firm? What will happen to the marginal productivity of the last worker hired by the firm?arrow_forwardDefine "the wage elasticity of supply" and derive an equation to describe the correlation between this elasticity and a labor supply curve. Then determine whether the following statement is true or false: "If women's labor supply in an economy is more elastic than that of men, it would be easier for firms to induce women workers to accept jobs." Explain your answer in words and show it in diagrams.arrow_forward
- The graph above shows a labor market and a typical individual firm that is hiring labor from that market. (a) If WM = WF, from what type of labor market does the firm hire its workers? (b) Assume the productivity of workers increases as a result of improvement in technology. What will happen to each of the following in the short run? The market demand for labor (i) The wage rate the firm will pay Explain.arrow_forwardA school district received 750 applications for 10 new openings. What does this tell you about the wages offered for this position in relation to the equilibrium wage? Explain.arrow_forwardBob White argues that if his wage went up from $10/hour to $20/hour he would still be able to pay rent and feed his family even if he worked half as many hours. So, if his wage increased he would want to work proportionally less. What is strange about Bob White's labor supply curve? it is very elastic it is very inelastic it slopes down it is verticalarrow_forward
- In the demand for labor for a firm was expressed as L = N x average hours per employee per day. Assume a firm has 50 employees that average 6 hours per day for 300 man-hours per day. A minimum wage is passed and reduces demand to 240 man-hours per day. Answer the following questions. a. How many layoffs are required if average hours per employee are not reduced? Explain. b. If no layoffs are made, what would the average hours per employee be set to? Explain.arrow_forwardNonearrow_forwardAnswer the following questions based on the below diagram that shows the labour demand curve for a firm, where X is the mid-point of the line MN. Wage (RM) M 12 Quantity of labour 3 6. a. Calculate the elasticity of labour demand between the wage of RM2 and RM4. b. Calculate the elasticity of labour demand between the wage of RM8 and RM10. 6.arrow_forward
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