Principles of Microeconomics

Steven A. Greenlaw, David Shapiro

Chapter 14

Labor Markets and Income - all with Video Answers

Educators

Chapter Questions

Problem 1

Table 14.10 shows levels of employment (Labor), the marginal product at each of those levels, and the price at which the firm can sell output in the perfectly competitive market where it operates.
a. What is the value of the marginal product at each level of labor?
b. If the firm operates in a perfectly competitive labor market where the going market wage is 12 dollar, what is the firm's profit maximizing level of employment?

Banhishikha Sinha

Banhishikha Sinha

Numerade Educator

Problem 2

Table 14.11 shows levels of employment (Labor), the marginal product at each of those levels, and a monopoly's marginal revenue.
a. What is the monopoly's marginal revenue product at each level of employment?
b. If the monopoly operates in a perfectly competitive labor market where the going market wage is 20 dollar, what is
the firm's profit maximizing level of employment?

Banhishikha Sinha

Banhishikha Sinha

Numerade Educator

Problem 3

Table 14.12 shows the quantity demanded and supplied in the labor market for driving city buses in the town of Unionville, where all the bus drivers belong to a union.
a. What would the equilibrium wage and quantity be in this market if no union existed?
b. Assume that the union has enough negotiating power to raise the wage to 4 dollar per hour higher than it would otherwise be. Is there now excess demand or excess supply of labor?

Banhishikha Sinha

Banhishikha Sinha

Numerade Educator

Problem 4

Do unions typically oppose new technology out of a fear that it will reduce the number of union jobs? Why or why not?

Banhishikha Sinha

Banhishikha Sinha

Numerade Educator

Problem 5

Compared with the share of workers in most other high-income countries, is the share of U.S. workers whose wages are determined by union bargaining higher or lower? Why or why not?

Banhishikha Sinha

Banhishikha Sinha

Numerade Educator

Problem 6

Are firms with a high percentage of union employees more likely to go bankrupt because of the higher wages that they pay? Why or why not?

Banhishikha Sinha

Banhishikha Sinha

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Problem 7

Do countries with a higher percentage of unionized workers usually have less growth in productivity because of strikes and other disruptions caused by the unions? Why or why not?

Armaan Tourani

Numerade Educator

Problem 8

Table 14.13 shows information from the supply curve for labor for a monopsonist, that is, the wage rate required at each level of employment.
a. What is the monopsonist's marginal cost of labor at each level of employment?
b. If each unit of labor's marginal revenue product is $\$ 13 dollar, what is the firm's profit maximizing level of employment and wage?

Banhishikha Sinha

Banhishikha Sinha

Numerade Educator

Problem 9

Explain in each of the following situations how market forces might give a business an incentive to act in a less discriminatory fashion.
a. A local flower delivery business run by a bigoted white owner notices that many of its local customers are black.
b. An assembly line has traditionally only hired men, but it is having a hard time hiring sufficiently qualified workers.
c. A biased owner of a firm that provides home health care services would like to pay lower wages to Hispanic workers than to other employees.

Mihir Nayar

Numerade Educator

Problem 10

Does the earnings gap between the average wages of females and the average wages of males prove labor market discrimination? Why or why not?

EA

Erwin Antoni

Numerade Educator

Problem 11

If immigration is reduced, what is the impact on the wage for low-skilled labor? Explain.

Mihir Nayar

Numerade Educator

Problem 12

What determines the demand for labor for a firm operating in a perfectly competitive output market?

Banhishikha Sinha

Banhishikha Sinha

Numerade Educator

Problem 13

What determines the demand for labor for a firm with market power in the output market?

Banhishikha Sinha

Banhishikha Sinha

Numerade Educator

Problem 14

What is a perfectly competitive labor market?

Banhishikha Sinha

Banhishikha Sinha

Numerade Educator

Problem 15

What is a labor union?

Banhishikha Sinha

Banhishikha Sinha

Numerade Educator

Problem 16

Why do employers have a natural advantage in bargaining with employees?

Banhishikha Sinha

Banhishikha Sinha

Numerade Educator

Problem 17

What are some of the most important laws that protect employee rights?

Banhishikha Sinha

Banhishikha Sinha

Numerade Educator

Problem 18

How does the presence of a labor union change negotiations between employers and workers?

Banhishikha Sinha

Banhishikha Sinha

Numerade Educator

Problem 19

What is the long-term trend in American union membership?

Banhishikha Sinha

Banhishikha Sinha

Numerade Educator

Problem 20

Would you expect the presence of labor unions to lead to higher or lower pay for worker-members? Would you expect a higher or lower quantity of workers hired by those employers? Explain briefly.

Banhishikha Sinha

Banhishikha Sinha

Numerade Educator

Problem 21

What are the main causes for the recent trends in union membership rates in the United States? Why are union rates lower in the United States than in many other developed countries?

Banhishikha Sinha

Banhishikha Sinha

Numerade Educator

Problem 22

What is a monopsony?

Banhishikha Sinha

Banhishikha Sinha

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Problem 23

What is the marginal cost of labor?

Banhishikha Sinha

Banhishikha Sinha

Numerade Educator

Problem 24

How does monopsony affect the equilibrium wage and employment levels?

Banhishikha Sinha

Banhishikha Sinha

Numerade Educator

Problem 25

What is a bilateral monopoly?

Banhishikha Sinha

Banhishikha Sinha

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Problem 26

How does a bilateral monopoly affect the equilibrium wage and employment levels compared to a perfectly competitive labor market?

Banhishikha Sinha

Banhishikha Sinha

Numerade Educator

Problem 27

Describe how the earnings gap between men and women has evolved in recent decades.

EA

Erwin Antoni

Numerade Educator

Problem 28

Describe how the earnings gap between blacks and whites has evolved in recent decades.

Mihir Nayar

Numerade Educator

Problem 29

Does a gap between the average earnings of men and women, or between whites and blacks, prove that employers are discriminating in the labor market? Explain briefly.

EA

Erwin Antoni

Numerade Educator

Problem 30

Will a free market tend to encourage or discourage discrimination? Explain briefly.

Daniel Cisneros

Daniel Cisneros

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Problem 31

What policies, when used together with antidiscrimination laws, might help to reduce the earnings gap between men and women or between white and black workers?

EA

Erwin Antoni

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Problem 32

Describe how affirmative action is applied in the labor market.

Mihir Nayar

Numerade Educator

Problem 33

What factors can explain the relatively small effect of low-skilled immigration on the wages of low-skilled workers?

EA

Erwin Antoni

Numerade Educator

Problem 34

Have levels of immigration to the United States been relatively high or low in recent years? Explain.

EA

Erwin Antoni

Numerade Educator

Problem 35

How would you expect immigration by primarily low-skill workers to affect American low-skilled workers?

EA

Erwin Antoni

Numerade Educator

Problem 36

What is the marginal cost of labor for a firm that operates in a competitive labor market? How does this compare with the MCL for a monopsony?

Norman Atentar

Numerade Educator

Problem 37

Given the decline in union membership over the past 50 years, what does the theory of bilateral monopoly suggest will have happened to the equilibrium level of wages over time? Why?

Banhishikha Sinha

Banhishikha Sinha

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Problem 38

Are unions and technological improvements complementary? Why or why not?

Natalie Britton

Natalie Britton

Numerade Educator

Problem 39

Will union membership continue to decline? Why or why not?

Banhishikha Sinha

Banhishikha Sinha

Numerade Educator

Problem 40

If it is not profitable to discriminate, why does discrimination persist?

Mihir Nayar

Numerade Educator

Problem 41

If a company has discriminated against minorities in the past, should it be required to give priority to minority applicants today? Why or why not?

EA

Erwin Antoni

Numerade Educator

Problem 42

If the United States allows a greater quantity of highly skilled workers, what will be the impact on the average wages of highly skilled employees?

Mihir Nayar

Numerade Educator

Problem 43

If all countries eliminated all barriers to immigration, would global economic growth increase? Why or why not?

EA

Erwin Antoni

Numerade Educator