7. Consider a competitive labor market where the market demand and the market supply are given initially by QD = 1000 – 50P and Q = 50P, respectively. The quantity of labor is measured in number of people (assume that people are perfectly divisible) and prices are measured in RMB. (a) Suppose there is a recession and the demand for labor is reduced by 200 workers at every price level. Find the number of people who are unem- ployed as a result. (b) Suppose the government wants to help the newly unemployed by paying them 50% of the pre-recession equilibrium wage. What would be the total cost of this program to the government? How does the program affect the post-recession aggregate surplus? Is there a deadweight loss associated with this program? (c) Suppose the government wants to reduce unemployment, so it is consid- ering using the money that would have been spent on the unemployment benefit program on a wage subsidy program instead. In particular, the government will reimburse the employers t% of the wages paid. What is the value of t that will make the wage subsidy program have the same cost as the unemployment benefit program? How many additional workers will be hired as a result?
7. Consider a competitive labor market where the market demand and the market supply are given initially by QD = 1000 – 50P and Q = 50P, respectively. The quantity of labor is measured in number of people (assume that people are perfectly divisible) and prices are measured in RMB. (a) Suppose there is a recession and the demand for labor is reduced by 200 workers at every price level. Find the number of people who are unem- ployed as a result. (b) Suppose the government wants to help the newly unemployed by paying them 50% of the pre-recession equilibrium wage. What would be the total cost of this program to the government? How does the program affect the post-recession aggregate surplus? Is there a deadweight loss associated with this program? (c) Suppose the government wants to reduce unemployment, so it is consid- ering using the money that would have been spent on the unemployment benefit program on a wage subsidy program instead. In particular, the government will reimburse the employers t% of the wages paid. What is the value of t that will make the wage subsidy program have the same cost as the unemployment benefit program? How many additional workers will be hired as a result?
Chapter16: The Markets For Labor, Capital, And Land
Section: Chapter Questions
Problem 13P
Related questions
Question
100%
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 2 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Recommended textbooks for you
Exploring Economics
Economics
ISBN:
9781544336329
Author:
Robert L. Sexton
Publisher:
SAGE Publications, Inc
Microeconomics: Private and Public Choice (MindTa…
Economics
ISBN:
9781305506893
Author:
James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:
Cengage Learning
Exploring Economics
Economics
ISBN:
9781544336329
Author:
Robert L. Sexton
Publisher:
SAGE Publications, Inc
Microeconomics: Private and Public Choice (MindTa…
Economics
ISBN:
9781305506893
Author:
James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:
Cengage Learning
Economics: Private and Public Choice (MindTap Cou…
Economics
ISBN:
9781305506725
Author:
James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:
Cengage Learning
Principles of Microeconomics
Economics
ISBN:
9781305156050
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning