PRINC OF ECONOMICS PKG >CUSTOM<
PRINC OF ECONOMICS PKG >CUSTOM<
7th Edition
ISBN: 9781305018549
Author: Mankiw
Publisher: CENGAGE C
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Chapter 36, Problem 3PA

Subpart (a):

To determine

The problem of time inconsistency.

Subpart (b):

To determine

The problem of time inconsistency.

Subpart (c):

To determine

The problem of time inconsistency.

Subpart (d):

To determine

The problem of time inconsistency.

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Suppose that a Labour Market determines the Quantity of Labour (L) as functions of the wage rate (w), according to the following Supply and Demand functions: Supply: L = w Demand: L=210 - 2w 9. [2 points] What is the free-market wage rate (w*) and Labour quantity (L*)? Now suppose that the Labour Force forms a union, and collectively bargains to a price floor of W = $80. 10. [3 points] What would be the Labour Decline and the Unemployment caused by this union policy? 11. [2 points] Who wins and who loses from this union policy? Suppose now that this union finds a way to push out the Demand for Labour to reduce this Labour Decline. 12. [3 points] How much does the union need to increase the Demand function by in order to reduce this Labour Decline to zero?
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