280. BUEC Assignment 4. Due in class November 30 10:30 a.m.
1. (i) In a carefully labeled diagram, illustrate the profit-maximizing wage and employment choice of a monopsonist. (ii) Now suppose that the government imposes a minimum wage on this firm, such that the minimum wage is greater than the monopsony wage but less than the wage that would be paid in a competitive market. In a new diagram, illustrate the effect of this minimum wage on the wage and employment level of the firm. (iii) In one clear sentence, explain the intuition underlying the firms employment response to this minimum wage. (iv) What minimum wage maximizes total payments to low-wage workers? Be precise. (v) What minimum wage maximizes employment of low-wage workers? precise.
2.
An Be employer will never pay for specific training, because they expect employees to be willing to incur the costs of becoming qualified for a job. True, false or uncertain. Explain briefly with reference to a carefully labeled diagram. Consider a firm that employs workers for h* hours per week in a jurisdiction where overtime pay is required for all hours worked in excess of standard hours, hs. The straight-time wage is w0, and the overtime premium is 1.5 for hours worked in excess of h*. Now consider an increase in the overtime premium to 2.0 for hours worked in excess of h*. Write down a general formula for the new straight-time wage, w1, that leaves workers and firms indifferent under these two policy regimes.
3.