LAIT HOW wage rates are determined. 26. Explain why there might be a wage differ
ID: 1144362 • Letter: L
Question
LAIT HOW wage rates are determined. 26. Explain why there might be a wage difference between two jobs. What could reduce the wage differential? What barriers might prevent the differential from being reduced? 27. Explain how demand for labour is a derived demand. 28. What is are positive and negative externalities. Explain using examples for each. 29. Use a diagram to explain the impact on a market when there are marginal social costs from negative externalities or marginal social benefits from positive externalities. 30. Give an example of a free rider. What is the solution to the problem of free riders? 31. Explain a carbon tax and a cap-and-trade system. What are the pros and cons of each method of carbon pricing? 32. Use an example to explain how an efficient market may be a market with less equity. 33. What is the process of creative destruction? Explain using examples. 34. What happens if we regulate "price gouging" to keep the price of emergency supplies from rising during a disaster? 35. What is the purpose of price discrimination? Describe examples. What does this have to do with elasticity?Explanation / Answer
26.
There might be wage differences between two jobs as two jobs demand different skills, create different sets of responsibilities and require different degree of risk taking abilities in pursuing the job. These differences between two jobs, create wage differences. Wage differences can be reduced by following ways:
1. Setting up similar pay bands for all jobs
2. Making all the jobs equally important
3. Equal sharing in the profit
4. Setting up wages on the basis of experience, rather upon the skills and knowledge
But, there are following barriers to reduce the wage differences. These barriers are as follows:
1. Different individuals own different skill sets and own different level of knowledge
2. Difference in responsibility and accountability associated with different jobs
3. Application of wages to attract the best talents, make it impossible to reduce the wage differentials
4. Different risk taking ability at jobs by the individuals
27.
Demand for labor takes place due to the goods required to be produced that are in demand. It means that demand of labor takes place due to the demand of goods in the market. So, the demand is labor is considered as derived demand.
28.
Positive externality refers to a scenario, where the production of goods and services create positive impact upon those also who are not directly related with the goods and services produced by the firm. For example, the production of textbooks and its uses by the students create positive externality. The study of textbooks creates knowledge, skills development and human capital development. It brings development and growth to the economy. It creates opportunity and favors everyone.
The negative externality refers to a scenario, where the production of goods and services, create negative impact upon those who are the customers of the products and services produced by the organization. For example, polluted water to the society, due to the release of pollutants by the firm, is a case of negative externality.
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