1. The wage for a particular occupation will be relatively low if labor _______ (demand/supply) is small relative to labor _______ (demand/supply).
2. If a city has a relatively high crime rate, we would expect the wage for taxi drivers to be relatively _______ (high/low).
3. In some countries, it is customary to tip restaurant waiters. We would expect the wages paid to waiters to be _______ (h7777igher/lower/the same) in countries where tips are customary.
4. If a worker switches from a relatively safe factory job to a job in a steel mill, the wage will increase by roughly ______________ (2/4/10/30) percent.
5. The wage premium for beautiful people is about _______percent, while the wage penalty for unattractive people is about percent
6. Beautiful workers get wider opportunities to _______, so a small difference in innate characteristics can lead to a large difference in _______.
7. Improved Safety and Wages. Consider an occupation that initially has a relatively high rate of nonfatal injuries. The equilibrium wage is $20 per hour, and the equilibrium quantity is 100,000 hours. Suppose a new safety device cuts the injury rate in half, and the supply of labor increases by 12 percent: The labor supply curve shifts to the right by 12 percent.
a. Use a graph to show the effects of the safety device on the equilibrium wage and employment. b. Suppose the elasticity of supply of labor is 3.0 and the elasticity of demand is 1.0. Use the price change formula discussed in an earlier chapter on elasticity to compute the change in the equilibrium wage.
c. Suppose the demand curve you’ve drawn is a long run demand curve. Explain the roles of the output effect and substitution effect on the change in the quantity of labor demanded.
8. Waiter Tips and Income. Consider a city where the typical waiter has a five-hour shift and daily sales (total bills presented to customers) of $400. The customary tip is 15 percent, so tips add up to $60 per day (15% of $400). The initial wage is $10 per hour, so the typical waiter initially earns $50 in wages paid directly by the restaurant. Suppose a local waiter association runs a successful campaign to get the city s restaurant patrons to increase the average tip from 15 to 20 percent.
a. Use a supply and demand graph with wage (excluding tips) on the vertical axis to show the effects of the new tip rate on the labor market.
b. How will the new tip rate affect the daily income (wages plus tips) of the typical waiter?