Questions and Problems

Check Your Understanding

1. Question

   Why are individual supply curves of labor potentially backward bending, but market and industry supply curves are always positively sloped?

   Prob 11 1. Why are individual supply curves of labor potentially backward bending, but market and industry supply curves are always positively sloped?

2. Question

   What factors will increase the demand for labor?

   Prob 11 2. What factors will increase the demand for labor?

3. Question

   When there is discrimination in the labor market, who loses? Why? Why is it harder to discriminate when both labor and product markets are competitive?

   Prob 11 3. When there is discrimination in the labor market, who loses? Why? Why is it harder to discriminate when both labor and product markets are competitive?

4. Question

   What are the important laws in place in the United States to prevent discrimination in the workplace based on race or gender?

   Prob 11 4. What are the important laws in place in the United States to prevent discrimination in the workplace based on race or gender?

5. Question

   How do unions exert their influence in the labor market?

   Prob 11 5. How do unions exert their influence in the labor market?

6. Question

   What are some changes in the types of jobs available in the United States over the past 50 years and what are some trends for future labor employment?

   Prob 11 6. What are some changes in the types of jobs available in the United States over the past 50 years and what are some trends for future labor employment?

Apply the Concepts

7. Question

   Some employees feel locked into their jobs because employer benefits, such as health insurance, are not transferrable to other companies. This “job lock” phenomenon is especially severe with health insurance coverage for employees if someone in their family has a severe pre-existing condition that prevents them from getting private health insurance at reasonable rates. What are the effects of this type of inflexibility on labor markets? What would be the impact if some form of health care reform eliminated the potential loss of health insurance for workers?

   Prob 11 7. Some employees feel locked into their jobs because employer benefits, such as health insurance, are not transferrable to other companies. This “job lock” phenomenon is especially severe with health insurance coverage for employees if someone in their family has a severe pre-existing condition that prevents them from getting private health insurance at reasonable rates. What are the effects of this type of inflexibility on labor markets? What would be the impact if some form of health care reform eliminated the potential loss of health insurance for workers?

8. Question

   Why do college professors who usually spend five to seven years in graduate school and play such an important role in shaping our society make so much less than a Hollywood producer such as Jerry Bruckheimer, who is unknown to most people (he has produced over 40 films and a dozen TV shows)?

   Prob 11 8. Why do college professors who usually spend five to seven years in graduate school and play such an important role in shaping our society make so much less than a Hollywood producer such as Jerry Bruckheimer, who is unknown to most people (he has produced over 40 films and a dozen TV shows)?

9. Question

   Why do we permit price discrimination with different ticket prices at movies based on age, or ladies’ nights at bars (when women get in free or pay less for drinks), or insurance coverage, for which women sometimes pay more (health) or less (automobile), but we do not permit discrimination in wage rates?

   Prob 11 9. Why do we permit price discrimination with different ticket prices at movies based on age, or ladies’ nights at bars (when women get in free or pay less for drinks), or insurance coverage, for which women sometimes pay more (health) or less (automobile), but we do not permit discrimination in wage rates?

10. Question

    Has globalization made it more difficult for unions to negotiate higher wages? Why or why not?

    Prob 11 10. Has globalization made it more difficult for unions to negotiate higher wages? Why or why not?

11. Question

    The airline pilots union has been very successful in negotiating six-figure salaries for pilots. The unions representing flight attendants have not been nearly as successful. What probably accounts for the difference?

    Prob 11 11. The airline pilots union has been very successful in negotiating six-figure salaries for pilots. The unions representing flight attendants have not been nearly as successful. What probably accounts for the difference?

12. Question

    Fifty years ago, married women ages 35 to 44 worked for pay only 10 hours per week on average; today they work over 26 hours on average. During the same period, the work-week for married men of the same age has been relatively constant, between 42 and 44 hours. Can you think of reasons why women’s working hours have nearly tripled in the last half-century?

    Prob 11 12. Fifty years ago, married women ages 35 to 44 worked for pay only 10 hours per week on average; today they work over 26 hours on average. During the same period, the work-week for married men of the same age has been relatively constant, between 42 and 44 hours. Can you think of reasons why women’s working hours have nearly tripled in the last half-century?

In the News

13. Question

    Tightened visa rules since September 11 have reduced the number of high-skill legal immigrants. Stiffer security rules and insufficient personnel have substantially increased the waiting time (and certainty) for visas. A New York Times article titled “Immigration and American Jobs” (October 19, 2012) reports a finding by economist Giovanni Peri that the wave of high-skilled legal immigrants from 1990 to 2007 increased the average wage of American workers by lifting the overall economy. Such findings have increased the pressure for immigration reform allowing more foreign graduates of American universities in the math, science, and technology fields to become permanent residents in the United States. Using the tools of labor demand and supply, evaluate the merits of the proposed immigration policy.

    Prob 11 13. Tightened visa rules since September 11 have reduced the number of high-skill legal immigrants. Stiffer security rules and insufficient personnel have substantially increased the waiting time (and certainty) for visas. A New York Times article titled “Immigration and American Jobs” (October 19, 2012) reports a finding by economist Giovanni Peri that the wave of high-skilled legal immigrants from 1990 to 2007 increased the average wage of American workers by lifting the overall economy. Such findings have increased the pressure for immigration reform allowing more foreign graduates of American universities in the math, science, and technology fields to become permanent residents in the United States. Using the tools of labor demand and supply, evaluate the merits of the proposed immigration policy.

14. Question

    The National Bureau of Economic Research in December 2010 reported a study by Elizabeth Wilde, Lily Batchelder, and David Ellwood that a highly skilled woman loses anywhere from $230,000 to $349,000 in lifetime earnings by having children. What are the reasons that having children reduces women’s earnings so much?

    Prob 11 14. The National Bureau of Economic Research in December 2010 reported a study by Elizabeth Wilde, Lily Batchelder, and David Ellwood that a highly skilled woman loses anywhere from $230,000 to $349,000 in lifetime earnings by having children. What are the reasons that having children reduces women’s earnings so much?

Solving Problems

15. Question

    Joe’s Mechanic, which provides oil changes for $40 per car, decides to increase the number of mechanics on staff from four to five. As a result, the number of oil changes completed in a day increases from fifteen to seventeen. What is the marginal revenue product of the fifth worker?

    Prob 11 15. Joe’s Mechanic, which provides oil changes for $40 per car, decides to increase the number of mechanics on staff from four to five. As a result, the number of oil changes completed in a day increases from fifteen to seventeen. What is the marginal revenue product of the fifth worker?

16. Question

    In the following table, suppose the price of output is $10 per unit. What are the marginal physical product and the marginal revenue product of the sixth worker? If the wage of each worker is $150, should the sixth worker be hired?

    
    
    
    

    Prob 11 16. In the following table, suppose the price of output is $10 per unit. What are the marginal physical product and the marginal revenue product of the sixth worker? If the wage of each worker is $150, should the sixth worker be hired?

17. Question

    According to By the Numbers, what is the average starting salary of workers with an undergraduate degree in economics? What is the average mid-career salary of workers with an undergraduate degree in economics?

    Prob 11 17. According to By the Numbers, what is the average starting salary of workers with an undergraduate degree in economics? What is the average mid-career salary of workers with an undergraduate degree in economics?

18. Question

    According to By the Numbers, during which seven-year period did the percentage of Americans with flexible work schedules increase the most?

    Prob 11 18. According to By the Numbers, during which seven-year period did the percentage of Americans with flexible work schedules increase the most?