chapter 16 connect

Consider the labor demand curve for a city. For each of the following events, say whether the labor demand curve shifts to the left, shifts to the right, or stays in place. Explain. (LO16-2) a. The local factory installs a robot assembly line. b. The local wage increases. c. The local factory is able to sell more products overseas. d. A new department store opens in town to compete with existing retailers.

a. A robot assembly line means that the factory no longer needs human line workers as much. This will decrease the demand for labor, shifting the demand curve to the left. However, it will need workers who can perform maintenance on these robots (something it never needed before), so the factory's demand for labor with robot-repair skills would increase, shifting that demand curve to the right. b. Nothing happens to move the supply curve in this case. The wage is determined by the intersection of supply and demand (unless there are other causes like unions or a minimum wage). If the wage has gone up, the quantity of labor demanded would go down, but the curve itself would not shift. c. If the prices of the products made at the local factory go up, then the marginal revenue of the workers at this factory also goes up, making the benefit from hiring additional workers greater. In this case, the firm would want more workers, so the demand for labor would increase; the demand curve would shift to the right. d. If a new department store opens, this increases the 'number of buyers' of labor, which will increase demand and cause the demand curve to shift to the right. At any given wage, there are more jobs offered in this city than before, because there is one more employer.

A town changes its zoning regulations to close down all its dance clubs because too many workers are staying out late and aren't able to come to work the next day. (LO16-4) a. In the short run, does the labor supply curve shift to the left, shift to the right, or stay the same? What happens to production in the town? b. The town develops a reputation as a boring place, so young people no longer want to live there. In the long run, does the labor supply curve shift to the left or the right? c. In the long run, would you expect wages and employment to go up or down? Explain your reasoning.

a. In the short run, if it has the desired effect, it would shift the labor supply curve to the right because every morning more workers are awake and ready for work than previously would have been. This leads to higher employment, and production in the town increases. b. This would cause a shift of the labor supply curve to the left in the long run. c. The short-run impact from part A would decrease wages, since more workers would be able to work. (A rightward shift in supply causes a lower price.) However, the effect in the long run would be to increase wages. As workers became more and more scarce in the town, firms would have to pay higher and higher wages to compensate employees for living in such a boring place. It is likely that this long-run effect will be greater than the short run effect, so the long-run effect on wages would be to increase them. However, some students might argue that the two effects cancel each other out (the short-run increase in supply is exactly reversed in the long run), which would cause there to be no overall change in wages. And since there is nothing in the facts to prevent this, this would also be an acceptable answer.

Indicate whether each of these factors will increase or decrease the odds that a young person in the United States will choose to get a college education. (LO16-3) a. An increase in the global number of unskilled workers. b. Increased industry investment in technology. c. Increased college tuition. d. Increased pay for high school graduates. e. Rising wages in India for college-educated workers.

a. Increase. b. Increase. c. Decrease. d. Decrease. e. Increase.

Consider the long-term labor supply curve for a city. For each of the following events, say whether the labor supply curve shifts to the left, shifts to the right, or stays in place. Explain. (LO16-5) a. The tuition of the local community college is raised. b. The local wage increases. c. The minimum wage in a neighboring city is increased. d. The city receives a sudden influx of immigrants from another country.

a. It shifts to the right for jobs not requiring a college degree. b. It stays the same. c. The supply of labor would decrease, so the supply curve would shift to the left. d. It would increase the supply of labor and shift the supply curve to the right.

Suppose a law is passed forcing everyone to work until age 69. (LO16-3) a. In March 2011 the labor force participation rate of people aged 65-69 was 33 percent. After the law is passed, will the labor force participation rate of this group go up or down? b. What will be the impact of the new law on the labor supply curve? Will it shift left, shift right, or stay in place? c. Will the new law raise wages, cut wages, or leave them the same?

a. It would increase the labor force participation rate. b. It would increase the labor supply curve, shifting right. c. It would cut wages.

A restaurant installs an automated conveyor belt system for getting food from the kitchen to customers' tables faster, with fewer dropped plates. Is this technology a substitute or a complement for the following jobs? (LO16-2) a. Waitress. b. Conveyor belt mechanic. c. Cook. d. Cashier.

a. Substitute. b. Complement. c. Complement. d. Complement.

a. Suppose that the weekly wage is $850. What is the marginal labor cost of the second worker per week? b. Suppose that the price of a bicycle is $450. What is the marginal revenue of the third worker, per week? c. How many workers does the bicycle manufacturer employ if the price per bicycle is $450 and the weekly wage is $850? d. If the price per bicycle drops to $300, what happens to the number of employed workers?

a. The marginal cost of labor is the wage that the company must pay the additional worker; in this case, the marginal cost of labor will always be $850. b. The marginal revenue is equal to the price of the output times the marginal product, or $450 x 3 = $1,350. c. The marginal revenue ($900) is still greater than the marginal cost of labor ($850) at 4 workers. For 5 workers the marginal revenue ($450) is less than the marginal cost of labor ($850); so the bicycle manufacturer will hire 4 workers. d. The number of employed workers will fall since the marg

Suppose labor laws in China were changed to require a higher minimum wage for Chinese workers. (LO16-4) a. What would happen to the price of Chinese-made products? b. How would that affect the labor demand curve for U.S. factory workers? c. What would happen to U.S. factory wages?

a. The prices of Chinese-made products would increase. b. The labor demand curve would increase and shift to the right. c. U.S. factory wages would increase.

Identify whether each of the following situations is an example of the market expansion effect or the labor pool effect of globalization. (LO16-2) a. A furniture maker shifts production from the United States to China. b. Merck, the big U.S. pharmaceutical company, hires more scientists in the United States so it can develop drugs to sell in overseas markets. c. A U.S. newspaper hires reporters in India to write about the U.S. stock market. d. A U.S. magazine hires reporters in the United States to write about the Indian stock market

a. This is an example of the labor pool effect of globalization. b. This is an example of the market expansion effect of globalization. c. This is an example of the labor pool effect of globalization. d. This is an example of the market expansion effect of globalization.

This chapter focused on individuals who work for an employer. But in March 2011 almost 9 million Americans reported that they were self-employed—that is, they worked for themselves. This raises an interesting question: Should more young people be willing to try starting their own businesses? Bill Gates was 20 years old when he started Microsoft. Sergei Brin and Larry Page were 25 when they founded Google. Inexperience and youth didn't seem to stop them from becoming billionaires well before the age of 30. On the other hand, most new businesses either fail or don't produce a profit for several years. (LO16-5) a. What are the advantages of starting a new business when you are young? (Hint: Consider opportunity cost.) b. What are the disadvantages of starting a new business when you are young? (Hint: Think about the different skills you might need.)

a. Younger people have less experience, and typically earn lower wages in the labor market. Therefore, giving up lower wages to start their own business results in a lower opportunity cost. While they may have more energy, creativity, or social networks, this is not necessarily true for younger people. b. Younger people may have less access to capital resources and will have had less time to develop the skills that will be useful in starting and fostering a new business.

Identify which of the following statements is false. (LO16-1) a. The Internet makes it easier for employers to find potential job candidates. b. High unemployment means there are no job openings. c. The labor demand curve slopes down. d. The labor market is in some ways different than other markets.

b