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Assume labor market demand is given by LD = 10 - w and labor market supply by LS = w- 2. Suppose that the government mandates that all firms provide a particular benefit to their workers and that this benefit costs t = $1 per unit of labor hired. Suppose also that workers derive no value from the mandated benefit. After the implementation of the mandate, what is the equilibrium quantity of labor hired?.

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Yusra Anees
Yusra AneesLv10
28 Sep 2019

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Related questions

A firm's labor demand and labor supply equations are shown below.

Labor demand equation: Ld = 50 - 4(w)

Labor supply equation: Ls = -20 + 3(w),

where w is the wage per hour worked.

Instructions: Round your answers to the nearest whole number.

a. The equilibrium wage is $ and the equilibrium quantity of labor employed is people.

b. The workers, thinking that their wages are too low, decide to strike. After tense negotiations, the firm decides to raise the wage by 10 percent.

After the wage increase, people are unemployed.

labor supply is NS = 10 + 2w Labor Demand is: ND = 170 - 2N It should be ND = 170 - 2N. Plus, the market is at equilibrium already when w = 40.

Suppose the labor supply for a firm is given by:

NS = 10 + 2w

and REAL Labor Demand is given by:

ND = 170 - 2N


Currently the real wage is 40 units of output.

a)(5 points) How many workers will the firm hire at a real wage equal to 40.


b)(5 point) How many workers are willing to work at a real wage of 40?


c)(5 points) Is the labor market clearing and if not, is there pressure for wages to go up or down? Explain.


d)(5 points) Now solve for the market clearing real wage.


e) (15 points) Explain exactly how this labor market will clear....wages will not stay at 40....explain the adjustment to equilibrium.... why would firms change their behavior and why would workers change their behavior? You need to be very specific using the law of diminishing returns and the substitution effect in labor supply in you explanation.


NOW DRAW A LABOR MARKET DIAGRAM LABELING AS POINTS A, THE NUMBER OF PEOPLE HIRED AT w = 40 AND THE NUMBER OF PEOPLE WILLING TO WORK AT w = 40. LABEL THE LABOR MARKET CLEARING POINT AS POINT B.


10 POINTS FOR CORRECT AND COMPLETELY LABELED GRAPH

f) (5 points) How many people are involuntarily unemployed at w = 40 and what do wwe mean by involuntarily unemployed?

Please be no cursive. Handwritten or typed out

2. (70 points total) Please show all work

Suppose the labor supply for a firm is given by:

NS = 10 + 2w

and REAL Labor Demand is given by:

ND = 170 - 2N

Currently the real wage is 40 units of output.

a)(5 points) How many workers will the firm hire at a real wage equal to 40.

b)(5 point) How many workers are willing to work at a real wage of 40?

c)(5 points) Is the labor market clearing and if not, is there pressure for wages to go up or down? Explain.

d)(5 points) Now solve for the market clearing real wage.

e) (15 points) Explain exactly how this labor market will clear....wages will not stay at 40....explain the adjustment to equilibrium.... why would firms change their behavior and why would workers change their behavior? You need to be very specific using the law of diminishing returns and the substitution effect in labor supply in you explanation.

NOW DRAW A LABOR MARKET DIAGRAM LABELING AS POINTS A, THE NUMBER OF PEOPLE HIRED AT w = 40 AND THE NUMBER OF PEOPLE WILLING TO WORK AT w = 40. LABEL THE LABOR MARKET CLEARING POINT AS POINT B.

10 POINTS FOR CORRECT AND COMPLETELY LABELED GRAPH

f) (5 points) How many people are involuntarily unemployed at w = 40 and what do wwe mean by involuntarily unemployed?

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