2. Consider the model of labor pooling, with each firm locating either in an isolated site or in a cluster with other fi rms. Suppose that good times (high demand) and bad times (low demand) are equally likely. The table shows wages and workforces in different times and locations. Wage $40 $20 Isolated Workforce 50 50 Good times (high demand) Bad times (low demand) A. Use a figure like Figure 3-3 to illustrate the situation. Wage $30 $30 Cluster Workforce 60 40 B. During good times, the benefit of being in the cluster as opposed to being isolated is, computed as.... C. During bad times, the cost of being in the cluster as opposed to being isolated is, computed as....

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Question

Economics

2. Consider the model of labor pooling, with each firm locating either in an isolated site or in a
cluster with other fi rms. Suppose that good times (high demand) and bad times (low
demand) are equally likely. The table shows wages and workforces in different times and
locations.
Wage
$40
$20
Isolated
Workforce
50
50
Good times (high demand)
Bad times (low demand)
A. Use a figure like Figure 3-3 to illustrate the situation.
Wage
$30
$30
Cluster
Workforce
60
40
B. During good times, the benefit of being in the cluster as opposed to being isolated is,
computed as....
C. During bad times, the cost of being in the cluster as opposed to being isolated is,
computed as....
Transcribed Image Text:2. Consider the model of labor pooling, with each firm locating either in an isolated site or in a cluster with other fi rms. Suppose that good times (high demand) and bad times (low demand) are equally likely. The table shows wages and workforces in different times and locations. Wage $40 $20 Isolated Workforce 50 50 Good times (high demand) Bad times (low demand) A. Use a figure like Figure 3-3 to illustrate the situation. Wage $30 $30 Cluster Workforce 60 40 B. During good times, the benefit of being in the cluster as opposed to being isolated is, computed as.... C. During bad times, the cost of being in the cluster as opposed to being isolated is, computed as....
FIGURE 3-3 Clustering to Share a Labor Pool
A: Isolated Site
24
16
12
Supply
High demand
Low demand
12
Number of workers
In an isolated site, the firm faces a perfectly
inelastic supply of labor (12 workers). The firm
hires the same number of workers during high
demand and low demand but pays a higher
wage during high demand.
24
12
10
B: Cluster with Many Firms
Low demand
d Supply
High demand
21
Number of workers
In a cluster, the firm faces a perfectly elastic
supply of labor, and the wage is fixed at $10.
The firm hires 21 workers during high demand
but only three workers during low demand.
Transcribed Image Text:FIGURE 3-3 Clustering to Share a Labor Pool A: Isolated Site 24 16 12 Supply High demand Low demand 12 Number of workers In an isolated site, the firm faces a perfectly inelastic supply of labor (12 workers). The firm hires the same number of workers during high demand and low demand but pays a higher wage during high demand. 24 12 10 B: Cluster with Many Firms Low demand d Supply High demand 21 Number of workers In a cluster, the firm faces a perfectly elastic supply of labor, and the wage is fixed at $10. The firm hires 21 workers during high demand but only three workers during low demand.
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