Answers must thoroughly address the question, and are to be type written, except for the graphs, which can be hand written. The prose should be well-written with proper grammar and sentence structure. The graphs are to be clearly constructed with all parts of the graphs labeled and arrows that show appropriate shifts in supply and demand curves.
1. Discuss the various ways that labor, as input into the production process, differs from other inputs like, say capital and land. All of you have been or will be workers and most of you will be managers of other worker someday. How do these ideas apply to your role as a worker and a manager of other workers?
2. The nurses are on strike in Minneapolis. Suppose they win a substantial wage increase from their job action and that the model of short-run labor demand applies.
A. Use the model to explain imply about the likely impact on employment? Hint: use a graph representing the model to make the case.
B. Cite and explain two variants of efficiency wage theory to explain why such an impact on employment may not occur. Illustrate your points with graphs.
3. Technological progress means that we can produce the same amount of goods and services using fewer resources. Some people are worried that technological progress will destroy jobs making it increasingly difficult for people to make a living.
A. Use an isoquant graph to illustrate the point of how technological progress might destroy jobs.
B. Use the same graph to show why technological progress will not necessarily destroy jobs.
C. Discuss conditions under which technological progress will not necessarily destroy jobs.
D. Discuss two real-world examples of parts a and b.
4. One famous research paper in economics suggested that the elasticity of demand for labor is -0.3. Assuming this elasticity really describes demand conditions in the labor market,
A. What will happen to the quantity of labor demanded (percent change) if the wage ncreases by 10 percent? (Show all your computations).
B. What will happen to the quantity of labor demanded if the wage decreases by 5 percent?
C. Suppose the going wage increases by 10 percent, will the total wage bill increase, decrease or stay the same (show your work). Explain in plain English.
D. When the elasticity of labor demand is inelastic like this, does it make it more or less difficult to argue for an increase in the minimum wage? Explain.
5. Use the ideas of scale and substitution effects to explain why the slope of the short-run labor demand curve differs from the slope of the long-run labor demand curve.