EBK PRINCIPLES OF MICROECONOMICS (SECON
2nd Edition
ISBN: 9780393616149
Author: Mateer
Publisher: W.W.NORTON+CO. (CC)
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Question
Chapter 6, Problem 8SP
(a)
To determine
Estimate the value of equilibrium wage.
(b)
To determine
Estimate the value of
(c)
To determine
Explain whether the minimum wage $8 cause surplus or shortage in the market.
(d)
To determine
Explain whether the minimum wage $6 causes a surplus or shortage in the market.
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Suppose Hinterland has been a closed economy (meaning there is no immigration from foreign countries and no international trade). The current labor force has 4 million skilled workers and 8 million unskilled workers. Both types of labor have perfectly inelastic supply curves, and the current skilled-unskilled wage ratio is 2.5. The elasticity of demand of skilled labor is -0.4, while the elasticity of demand of unskilled labor is -0.1. Suppose Hinterland allows a brief period of immigration, during which time 1 million skilled workers and 4 million unskilled workers migrate to Hinterland. Suppose there are no other changes to the economy. Approximately what is the new skilled-unskilled wage ratio? (Hint: The percent change in the wage ratio is approximately equal to the percent change in the skilled wage minus the percent change in the unskilled wage.)
The market for low-skilled workers is highly competitive, due to the high numbers of low skilled individuals. If the labor supply is given by the equation QS = 10W and measured per hour, and the demand for labor is given by the equation QD = 240 − 20W. Where Q measures the quantity of labor hired (in thousands of hours). Answer the following:
(a) At the market equilibrium what is the going wage rate and quantity of low-skilled labor being employed?
(b) If the union successfully forces a minimum wage increase of $9 per hour, at the new market equilibrium what will be the new quantity of labor hired and the quantity of any excess (demand or supply) of labor?
(c) At the $9 minimum wage how much deadweight loss is created?
(d) After the implementation of the $9 minimum wage, in terms of surplus how much better off are low-skilled workers and how much worse off are employers?
(e) If the minimum wage is set at $11 rather than $9 how does the deadweight loss and surplus change?
Use the black point (plus symbol) to indicate the equilibrium wage and level of employment before this law, and use the grey point (star symbol) to indicate the equilibrium wage and level of employment after this law is implemented.
True or False?????: Employers are made worse off but employees are made better off by this law.
Suppose that, before the mandate, the wage in this market was $1 above the minimum wage.
In this case, the wage rate with the employer mandate will be _$__
per hour, which will lead to _increase/decrease/nochange_ in the level of employment and _increase/decrease/nochange_ in the level of unemployment.
Now suppose that workers do not value the mandated benefit at all.
Which of the following statements are true under this circumstance? Check all that apply.
Employers are worse off than before the mandated benefit.
The equilibrium quantity of labor will rise.
The supply curve of labor doesn't shift at all.…
Chapter 6 Solutions
EBK PRINCIPLES OF MICROECONOMICS (SECON
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Similar questions
- Consider two distinct labor markets in two provinces, Gaziantep and Trabzon. Initially, the “native” wage ?? is the same in both provinces, with equilibrium occurring at the intersection of labor supply and demand curves in each of the provinces. Suppose that Gaziantep receives an influx of Syrian immigrants. Assume that immigrants and natives are “perfect substitutes” in production and immigration between the two provinces is “costless.” Firms are not allowed to move between provinces. Describe the new equilibrium in the labor market for natives in each of the provinces using labor supply and demand curves. Explain your reasoning. Assume that immigrants and natives are “perfect complements” in production and immigration between the two provinces is “costless.” Firms are not allowed to move between provinces. Describe the new equilibrium in the labor market for natives in each of the provinces using labor supply and demand curves. Explain your reasoning. Assume that immigrants…arrow_forwardSome workers are “skilled”. Each of them on average will install 4 packages per day. The rest of the workers are “rookies”, who on average install 1 package per day. Each package creates a value of $100 for the shop owner. The supply curve of skilled workers is QS = W – 100 and the supply curve of the rookie workers is QR = 4(W – 100), where W is the daily wage. The market for workers is perfectly competitive. If employers cannot observe each worker’s ability, how many packages per day will the workforce install in equilibrium? 480 300 240 None of the abovearrow_forwardSuppose employment and wages are determined by an implicit contract specifying a fixed wage at which workers must supply as much labour as the firm demands. Then firms earn _________ profits and workers earn __________ income during periods of high demand, compared to the alternative in which employment and wages are determined purely by competitive labour market forces. A. higher; higher B. lower; lower C. lower; higher D.higher; lowerarrow_forward
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