Economics - McConnell Flynn - 19 edition. Chapter 13. Textbook solutions

13.1 Explain why the general level of wages is high in the United States and other industrially advanced countries. What is the single most important factor underlying the long-run increase in average real-wage rates in the United States?
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13.2 Why is a firm in a purely competitive labor market a wage taker? What would happen if it decided to pay less than the going market wage rate?
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13.3 Describe wage determination in a labor market in which workers are unorganized and many firms actively compete for the services of labor. Show this situation graphically, using W1 to indicate the equilibrium wage rate and Q1 to show the number of workers hired by the firms as a group. Show the labor supply curve of the individual firm, and compare it with that of the total market. Why the differences? In the diagram representing the firm, identify total revenue, total wage cost, and revenue available for the payment of non-labor resources.
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13.4 Suppose the formerly competing firms in question 3 form an employers’ association that hires labor as a monopsonist would. Describe verbally the effect on wage rates and employment. Adjust the graph you drew for question 3, showing the monopsonistic wage rate and employment level as W2 and Q2, respectively. Using this monopsony model, explain why hospital administrators sometimes complain about a “shortage” of nurses. How might such a shortage be corrected?
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13.5 Assume a monopsonistic employer is paying a wage rate of Wm and hiring Qm workers, as indicated in Figure 13.8. Now suppose an industrial union is formed that forces the employer to accept a wage rate of Wc. Explain verbally and graphically why in this instance the higher wage rate will be accompanied by an increase in the number of workers hired.
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13.6 Have you ever worked for the minimum wage? If so, for how long? Would you favor increasing the minimum wage by a dollar? By two dollars? By five dollars? Explain your reasoning.
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13.7 “Many of the lowest-paid people in society—for example, short-order cooks—also have relatively poor working conditions. Hence, the notion of compensating wage differentials is disproved.” Do you agree? Explain.
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13.8 What is meant by investment in human capital? Use this concept to explain (a) wage differentials and (b) the long-run rise of real-wage rates in the United States.
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13.9 What is the principal-agent problem? Have you lever worked in a setting where this problem has arisen? If so, do you think increased monitoring would have eliminated the problem? Why don’t firms simply hire more supervisors to eliminate shirking?
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13.10 LAST WORD Do you think exceptionally high pay to CEOs is economically justified? Why or why not?
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