LABOUR SUPPLY1. Consider an economy with a 100% clawback welfare program. If the government reformsthis program to a negative income tax program with a lower clawback rate (e.g., 50%), howwould this affect an individual's optimal labor supply?Hint: Try to be as comprehensive as possible with your answer. Utilize concepts such assubstitution effect, income effect, and reservation wages. Consider dividing your answer intodifferent cases depending on the individual's working hours under the 100% clawback welfareprogram.

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Answered: LABOUR SUPPLY 1. Consider an economy…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Determine which of the three principle sources of wage differentials is most likely to account for each scenario. * A licensed physician earns more than a nurse: differences in total human capital compensating differentials differences in talent or ability * City sanitation workers earn more than park maintenance workers: compensating differentials differences in talent or ability differences in total human capital * Physical therapists earn more than massage therapists. differences in talent or ability compensating differentials differences in total human capital * Jack, a 22-year-old soccer player, earns more than Jim, who is the same age and has the same level of experience. compensating differentials differences in total human capital differences in talent or ability
The government wants to encourage individuals on welfare to become employed. It is considering two possible incentive programs: a. Give firms $2 per hour for every individual on welfare who is hired. b. Give each firm that hires one or more welfare workers a payment of $1,000 per year, irrespective of the number it hires. To what extent is each of these programs likely to be effective at increasing the employment opportunities of welfare workers? Giving firms $2 per hour for every individual on welfare who is hired O A. is likely to be unsuccessful because firms hire workers such that the marginal revenue product of labor equals the marginal cost of labor, and this approach reduces the marginal cost of labor by $2, decreasing employment. O B. is likely to be unsuccessful because the substitution effect from a wage decrease is negative in terms of hours of work. OC. may be successful or may be unsuccessful depending on whether the income effect or the substitution effect from a wage…
What happens to hours of work when the wage rate falls? Decompose the change in hours of work into income and substitution effects.
Suppose the hourly wage rate is $14, the rental price of capital is $2 and the price of output is constant at $42 per unit. Firm's production technology is q = 4K0.25 0.75, the marginal product of employment is MPE =3K0.25E-0.25 and the marginal product of capital is MPK = K™ 0.75 0.75. What is firm's optimal demand of labor if firm plans to produce q=19 units of outputs in the long-run? (please keep 1 decimal place in your answer)
Related to the theory of equilibrium in the labor market. Describe the impact of the following policies on equilibrium in the labor market in detail (Assumption: Labor supply is elastic): a. Payroll Tax imposed on companies.b. Imposition of Income Tax which is borne by employees.c. Income Subsidy Imposition (Payroll Subsidy)
what happens to hours of labor when the reservation wage rate increases? What happens to hours of labor when the reservation wage rate decreases? Graph it with an indifference curve, budget constraints, and reservation wage.
ECON 122: Short Writing Assignment #3 Suppose there are two different labor markets, A and B, each with identical demand for labor curves. If the Supply curves are also identical, draw a graph of each labor market in the space below: Now, assume that Market A's working conditions - for some reason - become much harsher than that for Market B (perhaps they are more dangerous or unhealthy). Illustrate how this development would impact your graph(s) above. What impact would this have on the wages in Market A relative to Market B? How about on total employment in each market? Why?

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