LABOR ECONOMICS LOOSELEAF 8/E
8th Edition
ISBN: 9781264010516
Author: BORJAS
Publisher: MCG
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Chapter 11, Problem 11RQ
To determine
Bonding critique in efficiency wage models.
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Chapter 11 Solutions
LABOR ECONOMICS LOOSELEAF 8/E
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- Explain why market forces are likely to eliminate discriminationarrow_forwardWhat is factor mobility?arrow_forwardThe figure depicts the efficiency wage equilibrium of a worker and a firm. According to this figure: Effort per hour I 0.7-. 0.5- 0- 0 Isocosts 6 10 12 Hourly wage, $ Worker's best response curve At B, the MRS is higher than the MRT. The firm would maximise its profits by paying an hourly wage that is $6 above the worker?s reservation wage. The firm is able to increase its profits from those attained at A by inducing the worker to exert higher effort in return for a higher wage. At C, the marginal rate of substitution (MRS) between higher wage cost and higher effort exceeds the marginal rate of transformation (MRT). Question 13 (1 point)arrow_forward
- Recently NJ chose to increase the minimum wage, who are the winners andlosers? Why? Make sure to draw a graph to support your answer. What is analternative solution?arrow_forwardWhy do economists say that discrimination is inerhently inefficent and therefore will not occur in general?arrow_forwardTwo firms compete for hiring workers in the labour market.The equilibrium wage is w = alpha + beta(H1 + H2), where alpha, beta; > 0 are parameters,and Hi is the number of workers hired by firm i = 1; 2. Firm i's profit is(y - w) Hi, where y is the output per worker. Assume y > alpha . Firm i choosesHi to maximize its profit. Do the following: (a) Consider the two firms decideon Hi simultaneously. Derive the Nash equilibrium. (b) Consider the twofirms make decisions sequentially. Firm 1 gets to hire first, followed by firm2. Derive the subgame perfect equilibriumarrow_forward
- Draw a wage setting curve, with the wage (S/hr) on the y-axis and the employment level on the x-axis. a. Suppose the market wage is $35/hr. Label this market wage on your graph of your wage setting curve, W1 = $35/hr. Label the corresponding level of market employment, E1. b. Draw a second graph of a firm with pricing power that uses labor in their production process. Assume their marginal cost of production is equal to the labor rate of $35/hr. Draw this firms demand curve, marginal revenue curve and marginal cost curve. (Any downward sloping demand curve and marginal revenue curve will do, as long as the y-intercept is above marginal cost (e.g., P = 100-10Q, MR = 100-20Q).) Label the firms profit maximizing level of price and quantity. c. Now, suppose a global pandemic reduces aggregate demand. How does this affect the demand curve the firm faces? How does this affect the production quantity, and labor demanded? Show this on your firm profit maximization graph. d. Assume employees…arrow_forwardWhat happens to the labor supply curve of single mothers when TANF benefits are introduced?arrow_forwardGive an example of how discrimination might persistin a competitive market.arrow_forward
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