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# Equilibrium wage rate

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Suppose that there are two states (A and B) in a country. Workers can freely move from one state to the other and all labor is equally skilled.

a) Depict graphically the two market equilibrium, clearly labeling the wage (use WA and WB) and employment that clears each market.
b) If a country-wide minimum wage (WM) is set in both states such that Wm < WA, what will be the relationship between WM and WB? What will be the effect of such a wage requirement on the labor markets in the two states?
c) Suppose state A decided to set their own minimum wage requirement (WMA) such that WMA > WA. Describe what would occur in the labor markets of the two states.
d) After the markets adjust, suppose the wage rate that clears the labor market in state B is \$20 and the minimum wage in state A is \$25. What is the probability that a person living in state B who wanted to find a job in state A would be able to get employment?

https://brainmass.com/economics/employment/equilibrium-wage-rate-70027

#### Solution Summary

Depict graphically the two market equilibrium, clearly labeling the wage (use WA and WB) and employment that clears each market and other features.

\$2.19

## Mixed Questions - Opportunity Cost of Leisure, Equilibrium Wage Rate etc.

1.How can we measure the opportunity cost of leisure? Why is the supply curve for labor usually upward sloping?

2.In the graph below, assume that the market demand curve for labor is initially D1. Answer the following questions.

(Graph Attachment)

a.What are the equilibrium wage rate and employment level?
b.What area represents economic rent?
c.Assume that the price of a substitute resource decreases, other things constant. What happens to demand for labor?
What are the new equilibrium wage rate and employment level?
What happens to economic rent?
d.Suppose instead that demand for the final product increases, other things constant. Using labor demand curve D1 as your starting point, what happens to the demand for labor?
What are the new equilibrium wage rate and employment level?
What happens to economic rent?

Use the following data to answer the questions below. Assume a perfectly competitive product market.

Units Of Labor Units of Output
0 0
1 8
2 12
3 17
4 21
5 23

a.Calculate the marginal revenue product at each level of labor input if output sells for \$4 per unit.
b.If the wage rate is \$15 per hour, how much labor will be hired?
c.What is the firm's total revenue and total amount paid for labor at the level of labor input you determined in (b)?

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