Review Questions

Labor Wage 1 1 2 3 3 5 4 7 5 8 6 10 TABLE 14.13 a. What is the monopsonist’s marginal cost of labor at each level of employment? b. If each unit of labor’s marginal revenue product is $13, what is the firm’s profit maximizing level of employment and wage? 9 . Explain in each of the following situations how market forces might give a business an incentive to act in a less discriminatory fashion. a. A local flower delivery business that had intentionally served only White customers notices that many of the local residents are Black. b. An assembly line has traditionally only hired men, but it is having a hard time hiring sufficiently qualified workers. c. A relationship counselor who had a strict policy of only serving straight couples notes the significant increase of LGBTQ people moving into the town. 10 . Does the earnings gap between the average wages of females and the average wages of males prove labor market discrimination? Why or why not? 11 . If immigration is reduced, what is the impact on the wage for low-skilled labor? Explain.

Review Questions

12 . What determines the demand for labor for a firm operating in a perfectly competitive output market? 13 . What determines the demand for labor for a firm with market power in the output market? 14 . What is a perfectly competitive labor market? 15 . What is a labor union? 16 . Why do employers have a natural advantage in bargaining with employees? 17 . What are some of the most important laws that protect employee rights? 18 . How does the presence of a labor union change negotiations between employers and workers? 19 . What is the long-term trend in American union membership? 20 . Would you expect the presence of labor unions to lead to higher or lower pay for worker-members? Would you expect a higher or lower quantity of workers hired by those employers? Explain briefly. 21 . What are the main causes for the recent trends in union membership rates in the United States? Why are union rates lower in the United States than in many other developed countries? 22 . What is a monopsony? 23 . What is the marginal cost of labor? 24 . How does monopsony affect the equilibrium wage and employment levels? 25 . What is a bilateral monopoly? 26 . How does a bilateral monopoly affect the equilibrium wage and employment levels compared to a perfectly competitive labor market? 27 . Describe how the earnings gap between men and women has evolved in recent decades. 28 . Describe how the earnings gap between Black and White people has evolved in recent decades. 29 . Does a gap between the average earnings of men and women, or between White and Black people, prove that employers are discriminating in the labor market? Explain briefly. 30 . Will a free market tend to encourage or discourage discrimination? Explain briefly. 31 . What policies, when used together with antidiscrimination laws, might help to reduce the earnings gap between men and women or between White and Black workers? 32 . Describe how affirmative action is applied in the labor market. 33 . What factors can explain the relatively small effect of low-skilled immigration on the wages of low-skilled workers? 34 . Have levels of immigration to the United States been relatively high or low in recent years? Explain. 35 . How would you expect immigration by primarily low-skill workers to affect American low-skilled workers?

Critical Thinking Questions

36 . What is the marginal cost of labor for a firm that operates in a competitive labor market? How does this compare with the MCL for a monopsony? 37 . Given the decline in union membership over the past 50 years, what does the theory of bilateral monopoly suggest will have happened to the equilibrium level of wages over time? Why? 38 . Are unions and technological improvements complementary? Why or why not? 39 . Will union membership continue to decline? Why or why not? 40 . If it is not profitable to discriminate, why does discrimination persist? 41 . If a company has discriminated against minorities in the past, should it be required to give priority to minority applicants today? Why or why not? 42 . If the United States allows a greater quantity of highly skilled workers, what will be the impact on the average wages of highly skilled employees? 43 . If all countries eliminated all barriers to immigration, would global economic growth increase? Why or why not?