1.Refer to the table above. Suppose that the union that provides labor to firms
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Question
1.Refer to the table above. Suppose that the union that provides labor to firms in this market successfully negotiates an increase in the wage rate from $8 to $10. As a result of the wage increase, firms will hire:
2.If the price of capital declines, the consequent output effect would be:
3.Which of the following describes the equilibrium condition in a purely competitive labor market?
4.Suppose all workers are identical, but working for Ajax is more pleasant than working for Acme. In all other nonwage aspects the two firms offer the same job characteristics. We would expect:
a. fewer workers and the total paid out for wages will decline. b. fewer workers, but the total paid out for wages will increase. c. fewer workers, but the total paid out for wages will remain unchanged. d. more capital, if capital and labor are used in fixed proportions in production.Explanation / Answer
Q1. At wage rate of $8, firm hires 1,800 workers.
Now, wage rate rises to $10 due to negotiation by union.
At wage rate of $10, firm hires 1,600 workers.
So, hiring by firm reduces by 200 workers as wage rises.
It can be said that firm hires fewer workers as a result of wage increase.
At wage rate of $8, firm hires 1,800 workers.
Total wage bill = 1,800 * $8 = $14,400
Now, wage rate rises to $10 due to negotiation by union.
At wage rate of $10, firm hires 1,600 workers.
Total wage bill = 1,600 * $10 = $16,000
Thus, total wages paid increases by $1,600 as a result of wage increase.
Therefore, as a result of the wage increase, firms will hire fewer workers, but the total paid out for wages will increase.
Hence, the correct answer is option (b).
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