CH. 28 : WAGE DETERMINATOIN. I.Looks at factors influencing prices of resources (workers). Last chapter focused on firms demand for the resource based.

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Presentation transcript:

CH. 28 : WAGE DETERMINATOIN

I.Looks at factors influencing prices of resources (workers). Last chapter focused on firms demand for the resource based on a set/given price for the resource. A. S and D analysis B. Qs will ask similar MRP and MRC calculation analysis

II. Wage Determination in Pure Competition A. in P.C., Profit Max. number of workers to hire is up to point where MRP = MRC 1. Note : MRP = D MRC = S (see p. 586 graphs) B. Monopsony = market in which firm is only employer in industry 1. Here, er must still increase wages to hire new workers. They must also increase wages of current workers. Thus, upsloping S and MRC curve that doesn’t coincide ( p. 588 graph)

2. Profit Max Output for Monopsonist = hire Q where MRC = MRP and pay wage where it hits the S line (thus pays a lower wage that PC)

3. Ex. Have 5 workers at $10 day. Hire sixth worker at $11 a day. What is MRC of 6 th worker? 16 C. 3 Union techniques to raise wages 1. Increase D for worker 2. Restrict S of worker (ex. license req.) 3. Unionize all workers D. Bilateral Monopoly = unionizing monopsony industry

III. Minimum Wage Laws IV. Wage Differences V. Pay for Performance Jobs