Chapter 18. Chapter 18

Question

One way to think about wages for different jobs is to see them as another application of the law of one price. We came across this law when we discussed speculation, and it came up again when we discussed international trade. The basic idea is that the supply of workers will keep adjusting until jobs that need the same kinds of workers earn the same wage. If similar workers earned different wages, then the workers in the low-paid jobs would reduce their labor supply, and the workers in the high-paid jobs would face more competition from those low-paid workers. Let’s look at 100 computer programmers who are trying to decide whether to workfor one of two companies: Robotron or Korrexia. To keep things simple, assume that both companies are equally fun to work for, so you don’t need to worry about compensating differentials here. The marginal product of labor (per additional hour of work) is in the following table:

Question

Question

Question

Suppose 50 more programmers come to town.The wage will now be $Pz2PEfhsNWI= and 8P3aa4uLOo8= workers will work at Robotron while 05dveybDphA= workers will work at Korrexia. (Please make sure to entire only whole numbers.)

Correct! This can be seen from the table and the graph. 50 additional workers will shift the supply curve to the right, leading to a new wage of $10. At this wage rate, Robotron can afford to hire 90 programmers (W = MPL) and Korrexia can afford to hire 60 programmers (W = MPL).

Sorry! Consider the benefits and costs of hiring one more worker. To review how firms determine how many workers to hire, please see the section “The Demand for Labor and the Marginal Product of Labor.”