Unions have generally been far more successful in organizing and raising wages in skilled trades such as carpentry than in unskilled trades. Use the laws of derived demand to explain why
What will be an ideal response?
There are at least two reasons. One is that the elasticity of substitution between skilled workers and other factors of production is low; thus firms cannot substitute some other factor of production if wages rise. Secondly, skilled labor is likely to be a relatively small percentage of total costs, and thus raising wages does not cause a large increase in total costs (which would lead to a reduction in supply, an increase in price, and a decrease in output). Unskilled labor has more substitutes and is likely to be a larger share of costs for firms that employ it, and thus if unions raise wages, firms employ other factors of production, and many workers will be laid off.
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Suppose a firm has a variable cost function VC = 20Q with avoidable fixed cost of $50,000. For regulators, the first-best regulated price is ______; the second-best regulated price is ____.
A. $80; $480 B. $480; $105 C. $80; $105 D. $105; $80
Using prices to promote efficiency in the utilization of bridges,
a. higher prices should be charged for the use of the most crowded bridges. b. lower prices should be charged for the use of the uncrowded bridges. c. traffic would be equalized among the bridges where space is a scarce resource. d. All of the above are correct.
When the housing bubble popped, the effect of the negative demand side shock and the negative supply side shock were the same on:
A. output, causing it to definitely decrease. B. prices, causing them to definitely rise. C. output, causing it to definitely increase. D. prices, causing them to definitely fall.
Frequent alterations in organizational architecture are likely to
A. affect all the employees of a company positively. B. promote actions that focus on short-run payoffs. C. increase the incentives of employees to learn more about their current job assignments. D. boost long-run investment efforts.