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Economic Concept: There are substitutes for Everything...even Labor!

Economic Concept: Unintended Consequences!

Seattle Aims at McDonald’s, Hits Workers

A $15 minimum wage changes the basic labor-market bargain between the fast-food industry and its workers.

By Holman W. Jenkins, Jr.

June 30, 2017 3:42 p.m. ET

By now you have read 15 articles on the Seattle minimum-wage fiasco. Since the city boosted its local minimum from $9.47 in 2014 to $13 last year (on its way to $15), a detailed investigation by University of Washington economists finds that beneficiaries actually saw their incomes fall by a net $125 a month because employers cut their hours.

When the price of something goes up, buyers demand less of it. This law of economics, like any law, some will always find inconvenient. But here’s the rest of the story.

The impetus came from people who don’t actually earn the minimum wage—labor-union leaders and think-tankers and activist organizations. The Service Employees International Union, as it has been happy to tell anyone, including a writer for the Atlantic Monthly two years ago, was already plowing $30 million into the “fight for $15” even though virtually all the hoped-for benefits would go to nonmembers.

There was even pushback from various union locals. Was this really a good use of our dues when most members already earn well above the minimum and have other priorities?

As the union also was not shy about noting, the real target was a very specific company, McDonald’s (Links to an external site.)Links to an external site. , which SEIU dreams of organizing despite the historically unwelcoming nature of franchise-based industries.

How a $15 minimum leads toward this halcyon day was never exactly spelled out, but here’s the answer: $15 would be used to change the basic labor-market bargain implied between the fast-food industry and its workers. Fifteen dollars an hour amounts to $31,200 a year and hardly a princely living. But you start adding mandated benefits and think about two-income households, and now you’re talking about a job that will sustain a different kind of life strategy than a Golden Arches job will today.

Organizers look fondly to Denmark, where a McDonald’s line worker receives $41,000 a year and five weeks of paid vacation. As the Atlantic put it two years ago, “Unionizing workers at McDonald’s and other fast-food chains might be a long shot, but if it succeeds, it might help lift a million or more workers into the middle class (or at least into the lower middle class) and create a model for low-wage workers in other industries.”

This sounds pretty but is misleading in a fundamental way. The workers a McDonald’s franchise would hire at $15 an hour are different from those it would hire at $8.29, the average earned by a fast-food worker today.

Costs would go up. The industry would likely shrink, it would likely replace workers with automation, but it would still create jobs at $15 an hour for people whose productivity can justify $15 an hour. The people who work at McDonald’s today, typically, would already be earning $15 an hour somewhere else if their productivity could justify $15 an hour.

Everybody needs to start somewhere, including the unskilled and those who lack a work history. Some need a job that doesn’t demand much of them. They have other obligations. They accept less pay to maximize flexibility and freedom from responsibility. They don’t plan to make a career of it. The fast-food industry in America is built on such people.

Proponents like to argue that employers, especially in the fast-food business, actually benefit from an increased minimum. It enables them to attract a more dedicated, productive employee. But why shouldn’t employers be left to make this trade-off themselves? And what about the people who won’t get hired at $15 and lose the benefit of a fast-food opportunity that is one of the easiest, quickest jobs to land in America?

When President Obama joined the fight in 2015, he argued that a full-time job should be able to support a family. This sounded pretty too, but was a way of saying that jobs that won’t support a family shouldn’t exist, and people whose productivity won’t support a family shouldn’t have jobs.

This is curious. Many countries that set a minimum wage, including the U.S., also set subminimum wages for teenagers, trainees, probationary hires, certain categories of disabled persons, etc. Having both a minimum and subminimum is hard to reconcile logically: Low-paying jobs shouldn’t exist, except some people need low-paying jobs, so they should exist. This concession to reality, in fact, shows not all minimum-wage advocates are economic scofflaws.

SEIU signed off on the “fight for $15” as part of a convoluted scheme to bring unionization to McDonald’s. As all would admit privately, the idea was always pie in the sky. But union leaders have to spend their members’ dues on something, or members might get the idea they don’t need to keep paying dues.

Now SEIU’s spending priorities have been changing again. Lately the leadership has arguably rediscovered its first love, electoral politics, not organizing. The union has let it be known that the “fight for $15” will be scaled back to free up funds to fight the 2018 congressional elections and 2020 presidential race. No doubt the Seattle study and all the attention it’s getting in the media make the decision even easier.

Appeared in the July 1, 2017, print edition.

A small but growing manufacturer of business class network routers. They produce two main types of routers, Model A and the more expensive variant, Model B. The company has a capacity of producing 500 Model A routers per month and currently produces 300 routers of that type every month. The routers are sold to small computer stores.

The company’s expenses are given below.

What are the contribution margin and the contribution rate [round to a full number]?

What is the break-even point in units? At their current level of production, how many units above or below the break-even point is company working at? How much profit per month would be earned at the current level of production? At the current level of production what percent of capacity is utilized?

What is the BE volume as a percent of current production [use the rounded number of BE units]? What is the BE volume as a percent of capacity [use the rounded number of BE units]?

Company has decided to increase its production from the current 300 routers per month to 425 routers per month, while at the same time lowering its selling price to $85. How would this change the company’s profit? A chain store wants to purchase additional routers from company on a regular basis. To meet the new demand, company expanded their facility by renting additional space. This increased their total fixed cost by 30% and doubled their capacity to 1200 units. company wants to break-even at 25% of this new capacity. What is the lowest price they can charge per router and still break-even?

Expenses are unit price is provided below.

please provide details. Thank You.

Your software company was invited to provide a proposal for a company in Australia. You currently have the cost in US dollars and need to convert the prices to the Australian dollar. Write a 2-part program using Ruby, Java®, or Python. Part 1: Write a function to gather the following costs from the user: Travel Cost: $9,800 Hotel Cost: $3,500 Rental Car Cost: $1,600 Labor Cost: $15,500 Part 2: Write a function to convert the costs from United States dollar (USD) to Australian dollar (AUD). Note: Look up the current USD to AUD exchange rate to use in your function. Test the program 3 times by providing different costs in USD. Provide the code and take a screenshot of the output, then paste the screenshot(s) into a Microsoft® Word document. Write a half-page response in the same Microsoft® Word document to address the following: Provide a manual for the user explaining how to use the program. Explain what type of user input validations you should have. What happens if the user enters a negative number? What happens if the user puts a $ in the input?

uestion 36

A manager is explaining to a staff auditor how various situations might affect the audit opinion. For each of the following scenarios, identify the appropriate reporting option by matching the scenario with the opinion type from the list provided. Assume that any financial statement effect is material, unless otherwise noted and that US auditing standards are followed.

In February 2020, the US dollar was trading on the foreign exchange market at 0.88 euros per US dollar, and today the US dollar is trading at 0.83 euros per US dollar.

   how will trading between the two countries be effected?

Quotes for the US dollar (US$) and Thai Baht (Bt) are as follow:

Spot contract midpoint S0Bt/US$=Bt 24.96/US$
1-year forward midpoint F0Bt/US$=Bt25.64?US$
1-year Eurodollar interest rate I$=6.125%per year

a) Your newspaper does not quote 1-year Eurocurrency interest rates on thai baht. Make your own estimate of iBt.

b) Suppose that you can trade at the prices for S0Bt/US$ , F0Bt/US$ and I$ just given and that you can also either borrow or lend at a Eurocurrency interest rate of iBt = 10% per cent. Based on a $1 million initial amount, how much profit can you generate through covered interest arbitrage ?

Reflection Question#1 – What is Christina Aguilera and the other musicians asking the U.S. government to do and explain why?

Reflection Question #2 – Describe your opinion on this issue and mention if you agree or disagree with the musicians as to what they are asking?

Reflection Question #3 – Give your opinion on --- “Whose job is it to police copyright infringement?”

“The music industry is begging the US government to change its copyright laws” By Jamieson Cox on April 1, 2016
Christina Aguilera, Katy Perry, deadmau5, and dozens of other musicians are asking the US government to revamp the Digital Millennium Copyright act (DMCA), the piece of law that governs access to copyrighted work on the internet. Musicians, managers, and "creators" from across the industry co-signed petitions sent to the US Copyright Office arguing that tech companies — think YouTube and Tumblr, sites with vast reserves of content that infringes on some copyright — have "grown and generated huge profits" on the backs of material that's illegally hosted.

"The growth and support of technology companies should not be at the expense of artists and songwriters," reads the letter signed by Aguilera, Perry, and their peers. "The tech companies who benefit from the DMCA today were not the intended protectorate when it was signed into law two decades ago."

Whose job is it to police copyright infringement?
This is a complicated issue, but you can boil it down to one key question: whose job is it to police the appearance of copyrighted material where it doesn't belong? When the DMCA was created in 1998, it was much easier for artists and labels to handle isolated incidents of copyright infringement using the act's "notice-and-takedown" system. (It's self-explanatory: the copyright owner files a notice of infringement, it's processed, and the offending post is taken down.)
It's a lot harder to police the internet c. 2016. It's flooded with new, potentially infringing material every second, and the industry the notice-and-takedown system isn't responsive enough to help musicians' work retain its value. It's also noting that sites like YouTube have thrived on the "copyright black market," earning millions of clicks and views from content sitting in the grey area between posting and takedown. The sites counter by arguing they've given the labels the tools they need (like YouTube's Content ID system) to make DMCA takedowns faster and more effective.
It's unclear exactly what impact the industry's coordinated response will have on the status of the DMCA. Bloomberg notes that the US Copyright Office doesn't have the power to directly change the DMCA; it can recommend a set of changes to a subcommittee tasked with reviewing contemporary copyright law, but that's about it. If you take the industry's word for it, that change needs to happen fast, because the status quo is endangering the future of music. "The existing laws — and their interpretation by judges — threaten the continued viability of songwriters and recording artists to survive from the creation of music," reads the musicians' letter. "The next generation of creators may be silenced if the economics don't justify a career in the music industry."

REFLECTION QUESTIONS FOR CHAPTER # 5 --- INTELLECTUAL PROPERTY

Read the article below and answer the following three reflection questions. The answers are to be submitted for grading.

Reflection Question#1 – What is Christina Aguilera and the other musicians asking the U.S. government to do and explain why?

Reflection Question #2 – Describe your opinion on this issue and mention if you agree or disagree with the musicians as to what they are asking?

Reflection Question #3 – Give your opinion on --- “Whose job is it to police copyright infringement?”

“The music industry is begging the US government to change its copyright laws” By Jamieson Cox on April 1, 2016
Christina Aguilera, Katy Perry, deadmau5, and dozens of other musicians are asking the US government to revamp the Digital Millennium Copyright act (DMCA), the piece of law that governs access to copyrighted work on the internet. Musicians, managers, and "creators" from across the industry co-signed petitions sent to the US Copyright Office arguing that tech companies — think YouTube and Tumblr, sites with vast reserves of content that infringes on some copyright — have "grown and generated huge profits" on the backs of material that's illegally hosted.

"The growth and support of technology companies should not be at the expense of artists and songwriters," reads the letter signed by Aguilera, Perry, and their peers. "The tech companies who benefit from the DMCA today were not the intended protectorate when it was signed into law two decades ago."

Whose job is it to police copyright infringement?
This is a complicated issue, but you can boil it down to one key question: whose job is it to police the appearance of copyrighted material where it doesn't belong? When the DMCA was created in 1998, it was much easier for artists and labels to handle isolated incidents of copyright infringement using the act's "notice-and-takedown" system. (It's self-explanatory: the copyright owner files a notice of infringement, it's processed, and the offending post is taken down.)
It's a lot harder to police the internet c. 2016. It's flooded with new, potentially infringing material every second, and the industry the notice-and-takedown system isn't responsive enough to help musicians' work retain its value. It's also noting that sites like YouTube have thrived on the "copyright black market," earning millions of clicks and views from content sitting in the grey area between posting and takedown. The sites counter by arguing they've given the labels the tools they need (like YouTube's Content ID system) to make DMCA takedowns faster and more effective.
It's unclear exactly what impact the industry's coordinated response will have on the status of the DMCA. Bloomberg notes that the US Copyright Office doesn't have the power to directly change the DMCA; it can recommend a set of changes to a subcommittee tasked with reviewing contemporary copyright law, but that's about it. If you take the industry's word for it, that change needs to happen fast, because the status quo is endangering the future of music. "The existing laws — and their interpretation by judges — threaten the continued viability of songwriters and recording artists to survive from the creation of music," reads the musicians' letter. "The next generation of creators may be silenced if the economics don't justify a career in the music industry."

The following table shows John’s total utility derived from billiards and bowling games. Assume John has $30 to spend on a game of billiards and/or a game of bowling. A game of billiards costs him $4, and a game of bowling costs him $2. Which of the following is John’s utility-maximizing combination of the games of billiards and the games of bowling?

​

Table 6.5

​

Select one:

a.

​Twelve games of bowling

b.

​Four games of billiards and four games of bowling

c.

​Five games of billiards and five games of bowling

d.

​Five games of billiards and two games of bowling

e.

​Three games of billiards and eight games of bowling

Question 12

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Suppose Ernie gives up his job as financial advisor for P.E.T.S., where he earned $30,000 per year, to open up a store selling pet-care products. He invested $10,000 in the store, which were originally savings that earned 5 percent interest. This year, the revenue from the new business was $50,000 and the explicit costs were $10,000. The economic profit earned by Ernie was _____.​

Select one:

a.

$20,000​

b.

$50,000​

c.

$40,000​

d.

​$10,000

e.

$9,500​

Question 13

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The Hound Dog Bus Company contemplates expanding its New Mexico operations by offering services from Raton to Santa Fe. It has estimated that the total cost of the trip will be $400, of which $150 is the fixed cost, which it has already paid. The company expects an increase in revenue by $275 from the trip. The Hound Dog Bus Co. should:​

Select one:

a.

​offer this service because the additional revenue exceeds the additional cost of this service.

b.

​offer this service because it will earn a positive economic profit.

c.

​not offer this service because marginal revenue is less than marginal cost.

d.

​not offer this service because total cost exceeds total revenue.

e.

​offer this service because total revenue exceeds fixed cost.

Question 14

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Which of the following would shift the supply curve of a good to the left?​

Select one:

a.

​An increase in the cost of an important resource used to produce the good

b.

​An increase in the price of that good

c.

​An increase in the number of producers of the good

d.

​A decrease in the price of an alternative good

e.

​An improvement in technology used in producing the good

Question 15

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A consumer’s willingness to pay additional money for time-saving goods depends primarily on:​

Select one:

a.

​the number of people in his or her household.

b.

​the wealth and property he or she possesses.

c.

​the opportunity cost of his or her time.

d.

​his or her social status.

e.

​the distance between his or her home and workplace.