Chat with AIExam 17: Work and the Labor Market
Using a supply and demand diagram, demonstrate graphically and explain verbally the following statement: "Existing workers prefer inelastic labor supplies but employers prefer elastic labor supplies."
(36) 
VerifiedThe key to seeing the validity of the statement is to explore what happens to wages when there is an increase in the demand for labor. If the labor supply is inelastic wages will increase significantly if there is an increase in demand (Diagram A below). If labor supply is elastic wages will increase only slightly if there is an increase in demand (Diagram B below). 
Which of the three types of demand-side discrimination discussed in the text is the most easily eliminated?
(36) VerifiedDiscrimination based on individual characteristics that don't affect job performance or are incorrectly perceived will be the easiest to eliminate since it is the only one of the three types that doesn't have an economic motivation.
What are the four factors that influence the elasticity of market labor demand?
(44) VerifiedThe four factors are:
1. The elasticity of demand for a firm's good.
2. The relative importance of the factor in the production process.
3. The possibility of, and cost of, substitution in production.
4. The degree to which marginal productivity falls with an increase in the factor.
18. How is artificial intelligence likely to influence the labor market?
Artificial intelligence is a technological change that will displace certain types of mental labor that people previously thought was unique to humans, by algorithms. There will still be work for humans on the high end and low end of creativity-designing algorithms on the high end, and doing the mental scut work of filling an algorithm to a particular issue on the less creative end. So it will likely not reduce the total number of jobs, but it will significantly change the nature of the jobs.
Four factors that influence the elasticity of market labor supply are. (1) Individuals' opportunity cost of working, (2) the type of market being discussed, (3) the elasticity of individuals' supply curves, and (4) individuals entering and leaving the labor market. How does each factor affect the elasticity of labor supply?
(39) What are four factors that influence the elasticity of market labor supply?
(39) Why would an increase in the marginal income tax rate likely to lead to a reduction in the number of hours worked (all other things held constant)? Why would an increase in the marginal income tax rate might actually lead to an increase in the number of hours worked?
(32) Consider the following labor supply and demand diagram: 
For each of the following situations, explain (and illustrate) what would happen to the market for labor.
(a) The firms who are employing these workers experience a big increase in the demand for their products.
(b) Intel develops a new computer chip that is capable of doing the same work as two employees. Assume that workers and computers are substitutes in Intel's production function.
(c) A newly elected U.S. president issues an executive order, restricting all immigration into the U.S.
For each of the following situations, explain (and illustrate) what would happen to the market for labor.
(a) The firms who are employing these workers experience a big increase in the demand for their products.
(b) Intel develops a new computer chip that is capable of doing the same work as two employees. Assume that workers and computers are substitutes in Intel's production function.
(c) A newly elected U.S. president issues an executive order, restricting all immigration into the U.S. (36) How is MRP different for a monopolist than for a perfectly competitive firm? In which type of firm will MRP be lower? Explain your answer.
(33) Give four examples of the interaction of market, social, and political forces in real-world labor markets.
(38) What are three types of demand-side discrimination in the labor market?
(37) Demonstrate graphically and explain verbally a monopsony labor market.
(50) Mangy Mutt Modifiers (3M) grooms dogs. 3M has a fixed capital stock, and uses only one variable input, labor. Additionally, 3M sells its output and buys its labor under competitive market conditions. Using the information provided, answer the questions that follow. Units of Labor Total Dogs Groomed Marginal Physical Product of Labor Marginal Revenue Product of Labor 0 0 1 15 15 22.50 2 43 28 42.00 3 75 32 48.00 4 105 30 45.00 5 130 25 37.50 6 150 20 30.00 7 164 14 21.00 8 174 10 15.00 9 182 8 12.00 10 188 6 9.00 11 192 4 6.00 (a) If the competitive wage rate is $15.00 per unit of labor, how many units of labor will 3M hire? Briefly explain your answer.
(b) Calculate 3M's gross profit at that combination of wages and labor. Assume that there are zero capital costs, so gross profits equal total revenue less labor costs. Show your calculation.
(41) What does it mean to say that the demand for labor is a derived demand?
(37) Why will an increase in the marginal income tax rate likely lead to a reduction in the number of hours worked? Why will an increase in the marginal income tax rate likely lead to an increase in the number of hours worked.
(40) How do you explain the fact that, over the last century, real wages in the U.S. increased substantially while the average number of hours worked per person fell?
(34) What is Luddite reasoning, and what do most economists find wrong with it?
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