Currently there is a shortage of math teachers for junior and senior high school. The shortage is so acute that schools are offering a $3,000 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 $3,000 salary bonus is sufficient to overcome her distaste. What advice would you give her about whether she should become a math teacher and why?
Demonstrate (with a graph) 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.
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 showing how the wage and employment policy of LCC was determined prior to 1933; how the minimum wage could increase both wages and employment after 1933; and that indicates that in a competitive market such a minimum wage policy would cause unemployment.
Suppose SBU Industries faces an upward sloped supply of labor of ES = 0.01w – 120 where w is the worker's annual salary. In this case, SBU's marginal cost of hiring workers is MC = 200 E + 12,000. Its production function is Q = f (E) = 100 E , and it faces downward sloped demand for its product of Q = 12,000 – 20 p . Together, this yields a labor demand curve of VMPE = 60,000 – 1,000 E .
