In the figure to the right, suppose thatWe is a wage rate of $33 per hour and Wu is a wage rate of $42 per hour. In addition, Qd is 10,000 workers per hour, Qe is 17,000 workers per hour, and Qs is 21,000 workers per hour. How much more or less do the firms in this industry spend, in total, on the labor employed each hour as a consequence of establishment of the union wage Wu above the equilibrium wage We?

Question

In the figure to the right, suppose thatWe is a wage rate of $33 per hour and Wu is a wage rate of $42 per hour. In addition, Qd is 10,000 workers per hour, Qe is 17,000 workers per hour, and Qs is 21,000 workers per hour. How much more or less do the firms in this industry spend, in total, on the labor employed each hour as a consequence of establishment of the union wage Wu above the equilibrium wage We?

Firms spend a total of$---per hour---a. less, b. more---on unionized labor. (Enter your response as a whole number.)

Answer 1

To calculate the total amount firms spend on labor each hour, we need to find the difference in wages between Wu and We and multiply it by the number of unionized workers (Qe).

The difference in wages is Wu - We = $42 - $33 = $9 per hour.

Therefore, firms spend $9 * 17,000 = $<<9*17000=153000>>153,000 more on unionized labor each hour.

Therefore, the answer is b. more. The firms spend $153,000 more per hour on unionized labor.

Answer 2

The establishment of a union wage Wu above the equilibrium wage We will result in an excess quantity of labor being supplied.

Answer 3

No, the establishment of a union wage above the equilibrium wage will result in a shortage of labor, not an excess quantity of labor being supplied.

Answer 4

To find out how much more or less the firms in this industry spend on labor as a consequence of the establishment of the union wage Wu above the equilibrium wage We, we need to calculate the difference in total labor costs between the two scenarios.

First, let's calculate the total labor cost at the equilibrium wage We. The total labor cost can be obtained by multiplying the wage rate We with the quantity of workers employed, Qe:

Total labor cost at We = We * Qe

Next, let's calculate the total labor cost when the union wage Wu is established. The total labor cost at Wu can be obtained by multiplying the wage rate Wu with the quantity of workers employed, Qd:

Total labor cost at Wu = Wu * Qd

Now, we can find the difference in total labor costs between the two scenarios:

Difference in total labor costs = Total labor cost at Wu - Total labor cost at We

To calculate the difference, substitute the given values into the equations:

Difference in total labor costs = (Wu * Qd) - (We * Qe)

Using the given values, substitute the wage rates and quantities:

Difference in total labor costs = ($42 * 10,000) - ($33 * 17,000)

Now, calculate the difference:

Difference in total labor costs = $420,000 - $561,000 = -$141,000

The negative sign indicates that the firms spend less on labor as a consequence of the establishment of the union wage Wu above the equilibrium wage We.

Therefore, the firms spend $141,000 less on unionized labor per hour.