Consider Bowles’ theory about the firm’s employment of labour for pursuing profit maximization. Define Q = output per hour, e = the amount of output per unit of work done, d = the amount of work done per hour, and w = the hourly wage. Unit labour cost, ulc = w/Q
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Consider Bowles’ theory about the firm’s employment of labour for pursuing
profit maximization. Define
Q = output per hour,
e = the amount of output per unit of work done,
d = the amount of work done per hour, and
w = the hourly wage.
Unit labour cost, ulc = w/Q
The figure below shows the labour exaction curves of the firm.
(a) If the firm has control over w, e and d, what can it do in order to
increase its profits?
(b) Explain the shape of the “old extraction curve” in the graph. What is the
slope of the straight line that links up a point on the labour extraction
curve and the origin?
(c) Suppose that e and d are determined by technology and the firm’s
extraction strategy (e.g., supervision), respectively. What causes the
shift of the labour extraction curve from the “old” to the “new”?
(d) Suppose there is a technical change such that e decreases but d
increases, and e (percentage change) < d (percentage change), is it
profitable for the firm to adopt the technology? Is it an efficient technical
change?
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