RATE 4. Excess supply with union wages Consider the housing construction industry. Assume that the industry is perfectly competitive in both input and output markets. Suppose that, through collective bargaining, a labor union negotiates an industry-wide wage for various kinds of labor (electricians, plumbers, and so on). In particular, it succeeds in negotiating a wage increase for carpenters from $30 to $40 per hour. The following graph shows the labor demand of an individual firm. On the following graph, show what happens at the firm level as a result of the union negotiations. 10 20 50 24 72 QUANTITY OF LABOR Demand 120 Demand Supply Supply Now consider the effects of the wage change on the entire industry. Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph. Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly. WAGE RATE (Dollars per hour) Supply Graph Input Tool Wage Rate 30 (Dollars per hour) Quantity 72 Demanded Quantity Supplied (Thousands of 72 (Thousands of workers) workers) Excess Supply 0 Shortage 0 (Thousands of workers) (Thousands of workers) Demand Demand Shifter Pro-union Advertising (Millions of dollars) 0 144 24 48 72 96 120 QUANTITY OF LABOR (Thousands of workers) The union's wage increase from $30 to $40 per hour causes an excess supply of thousands of workers.) workers. (Note: Be sure to enter your answer in Suppose that the union, in order to mitigate the unemployment caused by the wage increase, bolsters demand by rolling out a "Buy Union" advertising campaign. If the union spends $10 million on the campaign, the excess supply of labor will be answer in thousands of workers.) workers. (Note: Be sure to enter your
RATE 4. Excess supply with union wages Consider the housing construction industry. Assume that the industry is perfectly competitive in both input and output markets. Suppose that, through collective bargaining, a labor union negotiates an industry-wide wage for various kinds of labor (electricians, plumbers, and so on). In particular, it succeeds in negotiating a wage increase for carpenters from $30 to $40 per hour. The following graph shows the labor demand of an individual firm. On the following graph, show what happens at the firm level as a result of the union negotiations. 10 20 50 24 72 QUANTITY OF LABOR Demand 120 Demand Supply Supply Now consider the effects of the wage change on the entire industry. Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph. Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly. WAGE RATE (Dollars per hour) Supply Graph Input Tool Wage Rate 30 (Dollars per hour) Quantity 72 Demanded Quantity Supplied (Thousands of 72 (Thousands of workers) workers) Excess Supply 0 Shortage 0 (Thousands of workers) (Thousands of workers) Demand Demand Shifter Pro-union Advertising (Millions of dollars) 0 144 24 48 72 96 120 QUANTITY OF LABOR (Thousands of workers) The union's wage increase from $30 to $40 per hour causes an excess supply of thousands of workers.) workers. (Note: Be sure to enter your answer in Suppose that the union, in order to mitigate the unemployment caused by the wage increase, bolsters demand by rolling out a "Buy Union" advertising campaign. If the union spends $10 million on the campaign, the excess supply of labor will be answer in thousands of workers.) workers. (Note: Be sure to enter your
Principles of Microeconomics (MindTap Course List)
8th Edition
ISBN:9781305971493
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter18: The Markets For The Factor Of Production
Section: Chapter Questions
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