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QUESTIONS AND PROBLEMS 1-Suppose the government needs workers to repair a levee along a flood -prone river.

From the perspective of normative economics what difference does it make whether the able bodied citizens are compelled for work (for pay ) on the levee or whether a workforce is recruited through the normal process of making jobs offers to applicants and relying on their voluntary acceptance ? 2-Child Labor Laws generally prohibit children from working until age 14 (15, 16) and restrict younger teenagers to certain kinds of work that are not considered dangerous. Reconcile the prohibition of child legislation with the principles underlying normative economic analysis.

1-Analyse the impact of the following change on wages and employment in a given occupation : a-a decrease in the danger of occupation. b-an increase in product demand . c- increased wages in alternative occupations. 2 What would happen to the wages and employment levels of engineers if government expenditures on research and development programs were to fall? Show the effect graphically . 3-Suppose the health and occupational safety administration were to mandate that all punch pressure be fitted with a very expensive device to prevent injuries to workers .The device does not improve the efficiency with which punch process operate . What does the requirement do to the demand curve of labor ? Explain . 4-Suppose the adult population is 105 millions and there are 65 millions who are employed and 2,5millions who are unemployed .

Calculate the unemployment rate and the labor force population rate . 5-Suppose that the labor supply curve for school teacher is Ls=20 000 +350 W and the demand curve for schoolteachers is Ld=100 000-150W , where L=number of teachers and W the daily wage. a-Plot the demand and supply curves. b- What are the equilibrium wage and employment level in this market c-Now, suppose that at any given wage , 20000 more workers are willing to work as schoolteachers. Plot the new wage and employment level .Why doesnt employment grow by 20000


1-The marginal revenue product of labor in the local sawmill is MRPl=20 - 0,5 L , where L= number of workers . If the wage of sawmill workers is $ 10 per hour , then how many workers will the mill hire ? 2 An experiment conducted in USA found that the scores on standardized tests of reading, maths etc were the same in small classrooms (13-17students ) as in regular classrooms (22-25 students ). Suppose that there is a school has 90 students taught by four teachers and that added two additional teachers to reduce the class size .If the experiment study can be generalized, what is the marginal product of labor of these two additional teachers ? 3-In the last decade or two ,any countries has been subject to huge increases in the illegal immigration of workers oft unskilled .The governments have considered ways to reduce the flow. One policy that has been considered is to impose larger financial penalties on employers who are discovered to have illegal immigrants . What effect this policy have on the employment of unskilled illegal immigrants ? What effect would it have on the demand for skilled native labor ? 4-Suppose that the supply curve for the lifeguards is

Ls=20 and the demand is Ld=100-20W , where L= numbers of lifeguards and W=the hourly wage . Graph both the demand and supply curves . Now supply that the government imposes a tax of 1$ per hour par worker on companies hiring life guards . Draw the new (after tax ) demand curve in terms of employee wage . How will this tax affect the wage of lifeguards and the number employed as lifeguards?


1-Suppose that the government raises the minimum wage by 20%.Thinking of the four Hicks Marshall law of derived demand as they apply to a particular industry , analyze the conditions under which job los among teenage workers in that industry would be smallest . 2-The government in a effort to stimulate job growth , passes a law that gives a tax credit to employers who invest in new machinery and other capital goods . Appling the concepts underlying cross elasticity , discuss the conditions under which employment gains in particular industry will be largest . 3-Suppose that the demand for dental hygienist is Ld=5000-20W, where L=number of dental hygienists and W =$100 per day. What is the own-wage elasticity for dental hygienist when W=100$ per day ?Is the demand curve elastic or inelastic at this point ?What is the ownwage elasticity of demand when W=$200 per day ?Is the demand curve elastic or inelastic at this point ? 4-Suppose that the demand for burger flippers at fast -food restaurants in a small city is Ld=300-20W ,where L=the number of burger flippers and W=the wage in dollars per hour.

The equilibrium wage is $4per hour , but the government puts in place a minimum wage of 5 per hour . a-Assume that none of the firms has a monopsony power , how does minimum wage affect employment in theses restaurants? Draw a graph to show what has happened , and estimate the effects on employment in the fast-food sector. b-Suppose that in the city above, there is an uncovered sector .where Ls =100 +80 W and Ld=300 -20W before the minimum wage is put in place .Suppose that all the workers who lost their jobs as burgers flippers due to the introduction of the minimum wage seek work in the uncovered sector .What happens to wages and employment in that sector .Draw a graph to show the effects on both wages and employment in the uncovered sector .

1-Suppose that a workers alternative wage W*is $ 200 in every period .A firm offered the worker a three period contact contract that pays $ 180 in the first period and $200 in the second period . Assuming that the discount rate is 10 percent ,how much must the firm offer in the third period to attract the worker ? 2-A firm is considering hiring a worker and providing the worker with general training .The training costs $ 1000 and the worker MPl during the training period is $3000.If the worker can costlessly move to another employer in the post training period and that the employer will pay a wage equaling the new MPl , how much will the training firm pay the worker in the training period ? 3-Often there are discussion of taxing employees for the non wage benefits they represent (medical , life insurance for exemple are not subject to the personal income tax ) If benefits such as insurance are taxed ,they will become less attractive to employees , who may prefer to obtain increases in compensations in the

form of wage increases rather than increase in nonwage benefits. Should this happen, what would be the likely effect on hours of work per employee per week?


1-Suppose a government is considering several options to ensure that legal services are provided to the poor : Option A. All lawyers would be required to devote 5 percent of their work time to the work time to the poor ,free or change . Option B. Lawyers would be required to provide 100 hours of work , free of charge to the poor . Option C. Lawyers who earn over $ 5000 to a fund that the government would use to help the poor . Discuss the likely effects of each option on the hours of work among lawyers (It would help to draw the constraint created to each option ). 2-A firm wants to offer paid sick leave to its worker , but it wants to encourage them not , but it wants to encourage not to abuse it by being unnecessarily .The firm is considering two options . a-Ten days of paid sick leave per year ; any unused leave days at end of year are converted in cash at a the worker s daily wage rate . b-Ten days of paid sick leave per year; if no sick days are used for two consecutive years , the company agrees to buy the worker a $100000 life insurance policy . Compare the work incentive effects of the two options ,both immediately and in the long run . 3-Nhu is able to select her weekly work hours .When a new bridge opens up ,it cuts one hours off Nhus total daily commute to work .If both leisure

and income are normal goods , what is the effect of the shorter commute on Nhu s work time . The commuting time is a fixed cost of working time 4-Suppose that 5percent unemployment is defined as full unemployment and currently unemployment is 7 percent .Suppose further that we have the following information. -a-Unemployment rate 5% Labor force 6000 Unemployment 300 Employment 5700 - b-Unemployment rate 7% Labor force 5600 Unemployment 392 Employment 5208 a-What is the amount of hidden unemployment when the unemployment rate is 7 percent. b-if the population is 10000 , what change occurs in the participation rate as a result of the marginal change in the unemployment rate ? c-What is the economic significance of hidden unemployment be added to obtain a total unemployment figure ? 5-In any country, teenagers under 18 are prohibited from working more than 8 hours a day, except if they work in any jobs (babysitters, farm workers). Consider a 16-years old who primary household working in the summer is studying for college entrance exams and practicing a musical instrument , but who also has a two options for paid work .She can work for $6 per hour with a catering service (limited to 8 hours per day ),or work for $5 per hour as a babysitter (with no limitations on hours worked ) a-First , draw the daily budget constraints for each of her paid work conditions (assume she can work either for the catering service or as a babysitter , but cannot do both ). b-Next , analyze the possible labor supply decisions the 16-years old can make ,making special reference to the effects of the state law restricting most paid work to 8 hours a day .


1-Rose works in sales but is considering quitting work for two years to earn a MBA . Her current job pays $ 40000(after taxes ) but she could $55000 per year (after taxes )if she has a master degree in business administration .Tuition is $10000 per year and the cost of apartment near campus is equal to $ 10000 per year he is currently paying . Rose discount rate is 6 percent per year . She just turned 48 and plan to retire when she turns 60 ,whether or not she gets her MBA . Based on this information , should she go to school to earn her MBA? 2- The human capital model has implications for the age earnings profile . The Mincer s human capital earnings function is : Log W = a S + b T - c (T)2 + others variables Where W=wage workers wage rate , S =is the number of years of schooling , T=the numbers of labor market experience ,and T2 is a quadratic term In the Mincer earnings function , 1-what is b ? 2-how the coefficient b is typically interpreted? 3-what are b and c ? 4 what estimate the coefficient on experience and experience squared? What signifies b=c =0 If it not the case ,what is the age earnings profile implied by the human capital theory?