Question

In: Economics

Here are listed the supply and demand schedule for labor hours in France. This country has...

Here are listed the supply and demand schedule for labor hours in France. This country has several restrictive laws & strikes! Wage Quantity Supplied Quantity Demanded 10 3,000 5,000 12 3,500 4,500 14 4,000 4,000 16 4,500 3,500 18 5,000 3,000 Identify new equilibrium price and quantity if a minimum wage law is enacted for Wage = 12 euros an hour. What happens to the market wage if the trade union restricts the supply of labor hours to 3,000? Identify new equilibrium price and quantity if a minimum wage law is enacted for Wage = 16 euros an hour. Suppose that there is a labor trade union that wants to maximize the revenues of all workers. Which wage and quantity of labor hours supplied should the trade union propose? Discuss (no computations needed): What would be the effects in the labor market of a law that restricts the workweek to 35 hours?

Solutions

Expert Solution

Table

Wage Qs Qd
10 3000 5000
12 3500 4500
14 4000 4000
16 4500 3500
18 5000 3000

1) as eqm wage = 14

So if minimum wage = 12, which is below than eqm level, then it is not binding, it will have no effect , bcoz market clearing wage is already higher than Min wage

So new eqm wage w*= 14

labor Q*= 4000

2) if Labor supply restricted to 3000, then Market wage will fall to $ 10

3) minimum wage = 16, > Market clearing wage

Then it will be binding,

So eqm Q = 3500

w = 16

4) at revenue Maximization,

Maximize : W*Q

So choose W = 18, & Labor supplied = 5000

So max TR= 18*5000

= 90,000


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