Currently there is a shortage of math teachers for junior and senior high
school. The shortage is so acute that schools are offering a $3000 dollar
bonus in salary over the standard pay for new teachers. Your friend is an
incoming freshman in the school of education with an eye on teaching when
she gets her degree. She does not like math, but the $3000 salary bonus is
sufficient to overcome her distaste. What advice would you give her about
whether she should become a math teacher and why? Use a graph to help clarify
your answer. (Hint: Cobweb Model).
Demonstrate how a minimum wage can increase both the wage and employment
in a monopsony market even when the government sets the minimum wage above
the wage that would be paid in a competitive market. Briefly discuss your
graph and any relevant points of interest.
The South African government, under apartheid, enforced various laws that
prevented the full mobility of black workers between regions. White workers
on the other hand were perfectly mobile. The practical result of these policies
is that each firm in every region faced a rising labor supply curve for black
workers and a perfectly elastic supply curve for white workers. Assume that
blacks and whites are equally productive and that it is legal to offer different
wages to comparable black and white workers.
Analyze the effect these policies have on wage rates and employment
levels for black and white labor. Supplement your arguments with a detailed,
well labeled graph representing the employment decision of a typical firm.
Assume the typical firm is a competitive seller of its output.
Discuss the reasons why firms find it profit maximizing to offer different
wages to the two groups.
You are a political consultant for a senatorial candidate in Kentucky who
does not support the minimum wage. Her competitor supports the minimum wage
and has a story that indicates that minimum wages do not cause unemployment.
He tells of the Levenworth Coal Company (LCC) that employed most of the workforce
in Harlen Kentucky up until about 1970. Prior to 1933, LCC was unregulated
and determined its own employment policy unfettered by the government. After
1933, the government required the firm to pay a minimum wage. Historical records
indicate that employment actually increased after the minimum wage was adopted
although by somewhat less than if the firm was competitive. You need to help
your candidate’s credibility.
Draw a graph:
(1) showing how the wage and employment policy of LCC was determined prior
to 1933 and how the minimum wage could increase both wages and employment
after 1933 and
(2) indicating that in a competitive market such a minimum wage policy would
cause unemployment.
