What is a plausible explanation for the state of affairs

Assignment Help Econometrics

Reference no: EM13201792

Imagine a firm trying to minimize its unit labour cost and a situation where the employee actually responds to higher wages by putting more effort on the job. Moreover, the reservation wage of the employee (the minimum wage at which they are willing to work) is 15 dollars per hour. In fact, imagine the following relationship between output and the wage rate:

wage per hour Output per hour
15 170
16 190
17 208
18 224
19 238
20 250
21 260
22 268
23 274
24 278
25 280

a) Should the firm pay its employee as little as possible in an attempt to make the most money? If not, what do you think would be the best choice for the firm in terms of wage level? Show your work (and feel free to provide a graph if you want).

b) Suppose the reservation wage increases to 17 dollars. How would this likely affect the situation and your analysis in a) (would the answer change? If so, how?).

According to the neo-classical theory of wage setting, discrimination should be gradually weeded out of the labour market. Explain why this should be the case according to that theory. Discrimination, however, seems to endure. What is a plausible explanation for this state of affairs?

Reference no: EM13201792

Questions Cloud

Greatest predictors of poverty : Identify and discuss the three greatest predictors of poverty in America. In your opinion, what can be done to help the impoverished find their way out of poverty? Explain your answer.

What is the length of the wire : suppose you have a pipe with circumference 6 cm and length 30cm and that 8 turns of wire are wrapped around the pipe. What is the length of the wire?

How much area remains for offices : A one story building is 140 ft by 200 ft. If a square patio with sides 24ft occupies the center of the building, how much area remains for offices?

How deep should the searchlight be : A searchlight is shaped like a paraboloid of revolution. If the light source is located 5 feet from the base along the axis of symmetry and the opening is 8 feet across, how deep should the searchlight be?

What is a plausible explanation for the state of affairs : According to the neo-classical theory of wage setting, discrimination should be gradually weeded out of the labour market. Explain why this should be the case according to that theory. Discrimination, however, seems to endure.

Find the equation of the line for the demand equation : Find the equation of the line for the demand equation. Write your answer in the form p = mx + b. Hint: Write an equation using two points in the form (x,p).

Describe what can be done about monopolies : The goal of all capitalists is to dismiss the competition and gain market power. a) Explain why that might be hurtful for the economy, though not for everybody, clearly stating who wins and who loses in the presence of monopolies.

Develop a network representation of the distribution system : A company imports goods at two ports: Philadelphia and New Orleans. Shipments of one product are made to customers in Atlanta, Dallas, Columbus, and Boston.

Describe how the parts of a health care system : Describe how the parts of a health care system relate to and impact each other as services and technologies evolve

User Account

All Pages