8/12/2019 Wage Determination Ch15 Questions and Problems
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Chapter 15 - Wage Determination
Chapter 15 - Wage Determination
DISCUSSSION QUESTIONS
1. Explain why the general level of wages is high in the United
States and other industriallyadvaned ountries. What is the single
most important fator underlying the longrun inrease in
average realwage rates in the United States! LO1
".Why is a firm in a purely ompetitive la#or mar$et a wage
ta$er! What would happen if itdeided to pay less than the going
mar$et wage rate! LO2
%.Desri#e wage determination in a la#or mar$et in whih wor$ers
are unorgani&ed and manyfirms atively ompete for the servies of
la#or. Show this situation graphially' using W1toindiate the
e(uili#rium wage rate and Q1to show the num#er of wor$ers hired #y
the firms as agroup. Show the la#or supply urve of the individual
firm' and ompare it with that of the totalmar$et. Why the
differenes! )n the diagram representing the firm' identify total
revenue' totalwage ost' and revenue availa#le for the payment of
non-la#or resoures. LO2
PROBLES
".Complete the following la#or supply ta#le for a firm hiring
la#or ompetitively*LO2
a. Show graphially the la#or supply and marginal resoure +la#or,
ost urves for thisfirm. re the urves the same or different! )f they
are different' whih one is higher!#. lot the la#or demand data of
review (uestion " in Chapter 1/ on the graph used inpart a a#ove.
What are the e(uili#rium wage rate and level of employment!
%. ssume a firm is a monopsonist that an hire its first wor$er
for 0 #ut must inrease the wage
rate #y 0% to attrat eah suessive wor$er +so that the seond
wor$er must #e paid 02' the third01"' and so on,. LO!
a. Draw the firm3s la#or supply and marginal resoure ost urves.
re the urves thesame or different! )f they are different' whih one
is higher!#. 4n the same graph' plot the la#or demand data of
review (uestion " in Chapter 1/.What are the e(uili#rium wage rate
and level of employment!. Compare these answers with those you
found in pro#lem ". y how muh does themonoposonist redue wages
#elow the ompetitive wage! y how muh does themonopsonist redue
employment #elow the ompetitive level!
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8/12/2019 Wage Determination Ch15 Questions and Problems
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Chapter 15 - Wage Determination
5. Suppose that a ar dealership wishes to see if effiieny wages
will help improve itssalespeople3s produtivity. Currently' eah
salesperson sells an average of one ar per day while#eing paid 0"6
per hour for an eighthour day. LO"
a. What is the urrent la#or ost per ar sold!#. Suppose that when
the dealer raises the prie of la#or to 0%6 per hour the
averagenum#er of ars sold #y a salesperson inreases to two per day.
What is now the la#or ost
per ar sold! y how muh is it higher or lower than it was #efore!
7as the effiieny ofla#or expenditures #y the firm +ars sold per
dollar of wages paid to salespeople,inreased or dereased!. Suppose
that if the wage is raised a seond time to 0/6 per hour the num#er
of arssold rises to an average of ".5 per day. What is now the
la#or ost per ar sold!d. )f the firm3s goal is to maximi&e the
effiieny of its la#or expenditures' whih of thethree hourly salary
rates should it use* 0"6 per hour' 0%6 per hour' or 0/6 per hour!e.
y ontrast' whih salary maximi&es the produtivity of the ar
dealer3s wor$ers +arssold per wor$er per day,!
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