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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