2. What is a compensating wage differential? Discuss whether or not we observe such differentials in life. Further discuss, whether a compensating wage differential can actually "compensate" associated risks.
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- 1. Workers choose whether to work in a risky or in a safe job. Suppose there are 100 workers in the economy. Worker l's reservation price (for accepting the risky job over an equivalent safe job) is $1; worker 2's reservation price is $2, and so on. Because of technological reasons, there are only 8 risky jobs and they all need to be filled. What is the equilibrium compensating wage differential between safe and risky jobs? a) $8 b) $ 10 c) $ 100 d) $ 50 e) $3 2. Which of the following is true for the "backward-bending" range of the labour supply curve? a) The income effect is dominated by the substitution effect. b) The substitution effect is dominated by the income effect. c) There is no income effect. d) There is no substitution effect. e) The income and the substitution effects exactly offset each other.Assume that you are 18 years old and deciding whether to go to university or start working. If you work, you will earn a constant wage WHS throughout your career. If you study, you pay tuition for four years and then earn a constant wage WUNI.a. Show the condition under which you will choose to study. b. Explain how changes in tuition, interest rate, and wage differential (WUNI – WHS) wouldaffect your decisionFringe benefits:a. As you might have suspected, employee nonwage (fringe) benefits make up a muchlarger percentage of labor costs in the United States today than they did a few generationsago (refer to Table 3.1 in the textbook). Fringe benefits as a form of labor compensationis also very unique to the U.S. and other developed nations. Do you think that thegrowing fringe benefit share of labor costs has made the level of employment moreresponsive or less responsive to changes in labor demand over the ups and downs in theoverall economy? In other words, has it given the employers of labor more or lessflexibility as they try to adapt to continuously changing economic conditions?
- 1. Outline the efficiency wage model and critically assess its policy implications.It is difficult to measure to what extentdiscrimination affects labor market outcomesbecausea. data on wages are crucial but not readilyavailable.b. firms misreport the wages they pay to hidediscriminatory practices.c. workers differ in their attributes and the types ofjobs they have.d. the same minimum-wage law applies to workersin all groups.1. Given the graph below, would Amy enter the LF? What is her reservation wage? MG() A 33 30 15 16 Hours of NMT 2. Suppose Amy's nonlabor income increases and shifts her budget constraint to BE'. Given the graph below, what happened to Amy's reservation wage? How would Amy's work decision change? 0 MO(S) A 30 E 16 Hours of NMT
- Explain how the wage can adjust to balance thesupply and demand for labor while simultaneouslyequaling the value of the marginal product oflabor.Define the income-leisure trade-off that makes up the labor supply functionand the intuition for the upward sloping labor supply curve. What two effectsare involved in this trade-off? Explain.Otherthingsbeingconstant,howwillthefollowinginfluence the hourly earnings of employees? Explain your answer. The employee must work the midnight to 8:00 a.m. shift. The job involves split shifts (work three hours, off two hours, work three additional hours, and so on). Theemployerprovideslow-costchildcareservicesonthe premises. The job is widely viewed as prestigious. The job requires employees to move often from city to city. The job requires substantial amounts of out-of-town travel.
- Paying soldiers more who are in combat zones is an example of? O wage discrimination O compensating differentials O human capital effect O segmented market effect.S n abus tions Dashboard or Education The figures given below show the demand (D)and supply (S) curves of labor in two different markets. Figure 16.3 Wage Rate 18 12 Market A S Q₁ Quantity (Hours) Wage Rate 27 D 18 12 #tv Market B Q₁ D Which of the following is a reason for the wage differential shown in Figure 16.3? Quantity (Hours) O Market A represents the market for a risky occupation. O Working conditions offered by the firms in Market B are uncongenial. O The workers in Market B are unionized whereas the workers in Market A are not. O Market B hires a larger number of skilled workers than Market A. O The workers in Market B are more productive than the workers in Market A. AQ Daydreamer AaExplaining the college premium in the 1970s: As shown in Figure 7.8, the col-lege wage premium declined in the 1970s. Using a supply-and-demand graph, explain why this decline might have occurred.