BuyFindarrow_forward

Principles of Microeconomics

7th Edition
N. Gregory Mankiw
ISBN: 9781305156050

Solutions

Chapter
Section
BuyFindarrow_forward

Principles of Microeconomics

7th Edition
N. Gregory Mankiw
ISBN: 9781305156050
Textbook Problem

Policymakers sometimes propose laws requiring firms to give workers certain fringe benefits, such as health insurance or paid parental leave. Let’s consider the effects of such a policy on the labor market.

a. Suppose that a law required firms to give each worker $3 of fringe benefits for every hour that the worker is employed by the firm. How does this law affect the marginal profit that a firm earns from each worker at a given cash wage? How does the law affect the demand curve for labor? Draw your answer on a graph with the cash wage on the vertical axis.

b. If there is no change in labor supply how would this law affect employment and wages?

c. Why might the labor-supply curve shift in response to this law? Would this shift in labor supply raise or lower the impact of the law on wages and employment?

d. As discussed in Chapter 6, the wages of some workers, particularly the unskilled and inexperienced, are kept above the equilibrium level by minimum-wage laws. What effect would a fringe-benefit mandate have for these workers?

Subpart (a):

To determine
The changes in labor market after the introduction of fringe benefits.

Explanation

Policymakers will propose laws requiring firms to give workers certain fringe benefits, such as, health insurance or paid parental leave, and so forth. Some firms were already giving fringe benefits to the workers; it is valued more than $3. So, this new law creates no impact on the labor demand in the firm. However in this case, some firms that are currently having fringe benefits less than $3 would be affected by the law. If a firm currently pays no fringe benefits, then it reduces the value of marginal product of labor. The effect of this law on a labor market is explained with the help of the figure illustrated below...

Subpart (b):

To determine
The changes in labor market after the introduction of fringe benefits.

Subpart (c):

To determine
The changes in labor market after the introduction of fringe benefits.

Subpart (d):

To determine
The changes in labor market after the introduction of fringe benefits.

Still sussing out bartleby?

Check out a sample textbook solution.

See a sample solution

The Solution to Your Study Problems

Bartleby provides explanations to thousands of textbook problems written by our experts, many with advanced degrees!

Get Started

Additional Business Solutions

Find more solutions based on key concepts

Show solutions add

In what ways is economics a science?

Principles of Economics (MindTap Course List)

What are the advantages of a corporation?

Foundations of Business (MindTap Course List)

What is the purpose of the statement of shareholders equity?

Intermediate Accounting: Reporting And Analysis

RATIO CALCULATIONS Graser Trucking has 12 billion in assets, and its tax rate is 40%. Its basic earning power (...

Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)