Question

In: Economics

Suppose Pres. Trump and the Republican Party successfully expel all 11 million undocumented residents of the...

Suppose Pres. Trump and the Republican Party successfully expel all 11 million undocumented residents of the United States this year. This would represent an abrupt decrease in the overall supply of labor of about 4%. Since undocumented workers are heavily concentrated in agriculture, construction and household services (like cleaning, child and elder care and lawn care) the percentage decline in the supply of labor to these industries would be in the 15% - 25% range.
28. Using a neoclassical price adjustment framework, explain what effects this would have in the most affected industries.
29. Suppose that this results in a decline in the rate of profit in the most affected industries. Using the capital adjustment mechanism, explain what is likely to happen (and why) in the most affected industries.
Questions 38 – 41 are based on the efficiency wage framework. The efficiency wage framework can be summarized with the following equation:
P = k{w/(Q/L)}
Where:
P
K
W
Q
= Price
= the mark-up ratio
= the wage rate per hour
= the quantity produced
L
(Q/L)
{w/(Q/L)}
= the hours of labor employed in production
= output per hour of labor (labor productivity)
= labor cost per unit of output or the “efficiency
wage rate”
30. What are the chief factors determining the size of the mark-up ratio for an industry?
31. In the wage-productivity adjustment mechanism, why might a change in the hourly wage rate cause a change in labor productivity?
32. Explain how the wage-productivity adjustment mechanism approaches and equilibrium.
33. In the wage adjustment mechanism, if wages are cut, why might output prices increase?
34. Why, according to the wage adjustment mechanism, would a profit maximizing firm willingly pay wages higher than those required by a competitive labor market?

Solutions

Expert Solution

28. Using a neoclassical price adjustment framework, explain what effects this would have in the most affected industries.

Neoclassical method will be based on supply and demand in setting the price of the labor ,the supply curve of the labor will shift leftward and the demand will remain as constant as was before reduction of labor supply and the wage demanded by the current supply curve would be higher.

29. Suppose that this results in a decline in the rate of profit in the most affected industries. Using the capital adjustment mechanism, explain what is likely to happen (and why) in the most affected industries.

Decrease in Labor supply will increase the labor cost and decrease the profit levels of the company,and to adjust to this phenomenon companies no longer may be profitable at current level of output due to increase costs,so the firm may decide to cut the output level to match the decreased supply of labor.

30. What are the chief factors determining the size of the mark-up ratio for an industry?

Markup ratio is the premium which the manufacturers charge for the product an increase in the markup ratio will transfer wealth to the capitalist.If the product is of high demand then industry/company will increase the markup ratio of the product.

/too many questions as by rule


Related Solutions

Suppose 50% of all Chicago residents know what Steve Bartman did and a random sample of...
Suppose 50% of all Chicago residents know what Steve Bartman did and a random sample of 100 Chicago residents is selected. a) What approximately is the probability at least 55 in the sample know what Steve did? b) Suppose the sample were 100 times larger (i.e. a sample of 10,000 Chicago residents). What is probability that 5,500 residents know what Steve Bartman did?
*****Will rate highly***** Please make sure to answer all 5 questions! Suppose you have landed successfully...
*****Will rate highly***** Please make sure to answer all 5 questions! Suppose you have landed successfully on a good career path full time position as a "Financial Analyst" with a multinational high tech corporation in our Silicon Valley hub. On your first day on your job, your first project given is ratio/trend analysis of your new employer. Fortunately, you still remember financial analysis techniques discussed in your accounting 1B course final chapter 17, because your instructor required a lot of...
11. Suppose that after a few mergers and acquisitions, only one bank holds 70% of all...
11. Suppose that after a few mergers and acquisitions, only one bank holds 70% of all deposits in the United States. Would you say that this bank would be considered too big to fail? What does this tell you about the ongoing process of financial consolidation and the government safety net?
Suppose an economy consists of 11 people: 10 farmers and one miner. All individuals have identical...
Suppose an economy consists of 11 people: 10 farmers and one miner. All individuals have identical preferences, u(f,g) = ln(f) + 2ln(g), where f is a kilo of food, and g is a gram of gold. Each farmer is endowed with a 50 kilos of food and no gold. The miner is endowed with no food and one gram of gold. The farmers and the miner can trade food and gold at prices pf and pg. In the following, normalize...
   Suppose that you won the lottery and received $50 million cash after all taxes were...
   Suppose that you won the lottery and received $50 million cash after all taxes were paid. 1. Would your preferences change as a result of this fortunate event? Why or why not? 2. Now that money is largely not a constraint to you achieving your dreams, what constraints would you still face? 3. With regard to price elasticity of demand, would this increase in wealth change the elasticity for goods you consume on a regular basis? Why or why...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT