LABOR ECONOMICS
8th Edition
ISBN: 9781260004724
Author: BORJAS
Publisher: RENT MCG
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Question
Chapter 5, Problem 14P
To determine
Determine the compensating differential between the two firms.
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A craft chocolate producer considers hiring one extra worker in production. Currently, the shop is selling 200 chocolate bars per day at a price of $6. With one extra worker, the manager estimates that they would be able to increase the output to 250 chocolate bars per day and that they would need to lower the price to $5.50 in order to sell them. The daily salary of this new employee would be the same as for the existing ones: $150. What should the manager do?
Group of answer choices
Reduce the number of workers working in his chocolate place
Increase its selling price
Turn down the new worker and maintain the same number of employees
Increase the salary of all employees
Hire the extra worker
Ian works at an iron smelter in Pittsburgh, the center of iron
production in America. Due to the difficulty in measuring
the productivity of individual employees, Ian's employer as
well as the other iron smelters all pay an efficiency wage.
Adjust the wage line on the graph to reflect this situation.
What characteristic of efficiency-wage jobs is not
supported by the situation shown in the graph?
The wage rate will eventually return to the
market-clearing level.
Efficiency wages result in an increase in the rate
of unemployment.
Elevated wages serve as an economic incentive to
work harder.
Efficiency wage jobs result in a surplus of workers at
the wage being offered.
Wage ($ per hour)
Wage
Quantity of workers (in thousands)
S
O
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…
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