Principles of Economics (12th Edition)
12th Edition
ISBN: 9780134078779
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
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Chapter 19, Problem 2.3P
To determine
Identify the role of the social security taxes on employment compensation.
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Part B: As a policy analyst for the Congressional Budget Office, you have been asked to estimate the potential costs of occupational licensing to the U.S. economy. Using demand analysis, a basic examination of the national costs of licensing could be developed as follows: Suppose that the entire 10 percent wage premium is from market power (as opposed to greater productivity from enhanced human capital), and further assume that labor supply is perfectly elastic and the labor demand elasticity is 0.5. Hypothetically, assume that the Census data suggests that there are approximately 68 million licensed workers in the U.S. Also assume that the average earning is $50,000. Calculate the potential job loss and the annual cost to consumers as a consequence of occupational licensing.
Hint: Recall that the movement up the demand curve is the change in wages times the labor demand elasticity times the number of workers. To calculate the costs, what would a license worker make if they were…
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Explain your answer comprehensively about the question stated below:
Suppose Congress were to mandate that all employers had to offer their employees a life insurance policy worth at least $50,000. Use Economic Theory and concepts, both positively and normatively, to analyze the effects of this mandate on employee well-being.
What effect does this mandate have on the demand for labor? Use also curve to demonstrate the answer.
Chapter 19 Solutions
Principles of Economics (12th Edition)
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- On the following graph, use the green line (triangle symbol) to show the effect this employer mandate has on the demand for labor. (?) 20 Demand Supply New Demand New Supply + Equilibrium Before Law Equilibrium After Law A 0 10 Quantity of Labor (Thousands) Topic 6 Homework (Custom) Suppose employees place a value on this benefit exactly equal to its cost. On the preceding graph, use the purple line (diamond symbol) to show the effect this employer mandate has on the supply of labor. Suppose the wage is free to balance supply and demand. Use the black point (plus symbol) to indicate the equilibrium wage and level of employment before this law, and use the grey point (star symbol) to indicate the equilibrium wage and level of employment after this law is implemented. True or False: Employers are made worse off but employees are made better off by this law. True False Suppose that, before the mandate, the wage in this market was $3 above the minimum wage. per hour, which will lead to in…arrow_forwardIn 2011, the government paid $600 million in retirement benefits to decreased federal employees. This is an example ofarrow_forward6arrow_forward
- Suppose that, on average, men earn $17 an hour and have an average of 15 years of schooling. Women earn $15 an hour and have an average of 14 years of schooling. If the estimated return to schooling for men is 0.30 (implying that each additional year of schooling translates into an additional 30 cents per hour) and the returns for schooling for women is 0.2, then the gender gap in schooling explains: 10% of the wage gap between men and women. 20% of the wage gap between men and women. 30% of the wage gap between men and women. 15% of the wage gap between men and women.arrow_forwardThe legislature in a state in the South passes strong "right-to-work" laws that make it very difficult for unions to organize workers, so the wage is always equal to the market-clearing value. Except for this difference in legislation, the northern and southern states are very similar.The initial position of a supply-and-demand graph corresponds to the initial labor market condition in the southern state before the labor union negotiated the new, higher wage for workers in the northern state.Suppose that after the wage goes up in the northern state, some workers in the northern state lose their jobs and decide to move to the southern state. Which of the following groups are better off as a result of the union action in the northern state? (select all that apply) a) The original workers in the southern state b) Workers in the northern state employed at the union wage c) Employers in the northern state d) Workers who find new jobs in the southern statearrow_forwardThe labor supply curve: Multiple Choice shows the number of firms that are willing and able to hire workers at each given wage. is made up of firms who want to hire workers at each given wage. shows that the number of firms that want to hire workers decreases as the wage increases. is made up of workers who want to work for firms at each given wage. In 2017, the city of Seattle passed legislation implementing a $15 per hour minimum wage. Critics of the plan argued that this legislation would increase: Multiple Choice cyclical unemployment. structural unemployment. frictional unemployment. real-wage unemployment.arrow_forward
- Historically, employers have tended to lay-off workers during economic downturns. According to a survey conducted by Yale economist Truman Bewley, which of the following help to explain this phenomenon? Check all that apply. Employers believe that they are not legally able to reduce wages. Even during severe recessions, most workers are able to keep their jobs, and so would rather see a few of their fellow workers laid off than take a pay cut themselves. Employers are fearful of renegotiating contracts because of threats from union officials. What is the major policy implication of this phenomenon? When the economy is experiencing a contraction, it causes the aggregate supply curve to shift to the right, returning the economy to potential output on its own. When the economy is experiencing a contraction, it tends to require an increase in aggregate demand to return to potential output. Long-term contracts limit wage flexibility, and most economists agree that they are therefore…arrow_forward11. Problems and Applications Q13 Suppose that Parliament passes a law requiring employers to provide employees some benefit (such as dental care) that raises the cost of an employee by $4 per hour. Assume that firms were not providing such benefits prior to the legislation. On the following graph, use the green line (triangle symbol) to show the effect this employer mandate has on the demand for labour. Wage (Dollars per hour) 20 18 16 14 12 10 8 4 2 0 Demand + 0 1 + 2 3 4 5 6 7 Quantity of Labour 8 Supply 9 10 New Demand New Supply Equilibrium Before Law Suppose employees place a value on this benefit exactly equal to its cost. Equilibrium After Law (?)arrow_forwardGreg is running an economic consulting company with three employees. He is considering hiring more employees. The going salary for economic consultants with the skills the company needs is $118,000 per year. Each new employee will need a computer and other equipment that cost $3,000 per year. Each client pays the company $30,000 per year. The table shows how the number of clients depends on the number of employees. What is the company's marginal revenue from the first additional employee? ($) Numer of employees 3- 10 4- 15 5- 19 6- 22 7- 24arrow_forward
- Please write a brief dissertation (200 - 400 words) stating your opinion on Thomas Piketty's proposals. He proposes the implementation of a global progressive tax on capital to mitigate wealth inequality.arrow_forwardConsider two states that adopt different laws concerning labor unions. The following graph shows the labor market in a state in the North. Initially, the market-clearing wage there is $8.00 per hour. Suppose that the legislature in this northern state passes laws that make it easy for workers to join a union. Through collective bargaining, the union negotiates a wage of $10.00 per hour. Use the graph input tool to help you answer the following questions. *Attached* Enter $10.00 into the box labeled Wage on the previous graph. Hint: Be sure to pay attention to the units used on the graph. At the union wage, _________ union workers will be employed. The following graph shows the labor market in a state in the South. The legislature in this state passes strong "right-to-work" laws that make it very difficult for unions to organize workers, so the wage is always equal to the market-clearing value. Except for this difference in legislation, the two states are very similar.…arrow_forwardThe Labor Market: End of Chapter Problem 9. Societies tend to permit some degree of price discrimination in product markets. For example, businesses discriminate in the pricing of amusement park tickets based on age (children and senior citizens are often offered discounts) and automobile insurance based on gender (men are often charged higher premiums than women). However, we do not permit discrimination in wage rates. Why do socities allow price discrimination but reject economic discrimination? Price discrimination is a natural right, but economic discrimination is a legal right. Price discrimination increases consumer surplus, but economic discrimination increases producer surplus, and societies care more about consumers than producers Price discrimination can have both valid positive and normative justifications, but economic discrimination never has valid positive or normative justifications. Price discrimination is always necessary to promote competition among firms, but…arrow_forward
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