ECON 3100 MSU Calculate the Competitive Market Wage Economics Questions

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CHAPTER 10
10-1. Suppose the firm’s labor demand curve is given by:
w = 20 – 0.01E,
where w is the hourly wage and E is the level of employment. Suppose also that the union’s
utility function is given by
U = w ? E.
It is easy to show that the marginal utility of the wage for the union is E and the marginal
utility of employment is w. What wage would a monopoly union demand? How many
workers will be employed under the union contract?
Utility maximization requires the absolute value of the slope of the indifference curve equal the
absolute value of the slope of the labor demand curve. In this case, the absolute value of the slope
of the indifference curve is
MU E
w
=
.
MU w
E
The absolute value of the slope of the labor demand function is 0.01. Thus, utility maximization
requires that
w
= 0.01 .
E
Substituting for w with the labor demand function, the employment level that maximizes utility
solves
20 ? 0.01E
= 0.01 ,
E
20 – 0.01E = 0.01E
20 = 0.02E
E = 1,000 workers.
The highest wage at which the firm is willing to hire 1,000 workers is 20 – 0.01(1000) = $10.
Thus, the monopoly union requires the firm to employ 1,000 workers, each at $10 per hour.
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10-2. Suppose the union in problem 1 has a different utility function. In particular, its utility
function is given by:
U = (w – w*) ? E
where w* is the competitive wage. The marginal utility of a wage increase is still E, but the
marginal utility of employment is now w – w*. Suppose the competitive wage is $8 per hour.
What wage would a monopoly union demand? How many workers will be employed under
the union contract? Contrast your answers to those in problem 1. Can you explain why they
are different?
Again equate the absolute value of the slope of the indifference curve to the absolute value of the
slope of the labor demand curve:
MU E
w ? w*
=
= 0.01 .
MU w
E
Setting w* = $8 and using the labor demand equation yields:
20 ? 0.01E ? 8
= 0.01 ,
E
12 – 0.01E = 0.01E
12 = 0.02E
E = 600 workers.
The highest wage at which the firm is willing to hire 600 workers is 20 – 0.01(600) = $14. Thus,
the monopoly union requires the firm to employ 600 workers, each at $14 per hour.
In problem 1, the union maximized the total wage bill. In problem 2 the utility function depends
on the difference between the union wage and the competitive wage. That is, the union
maximizes its rent. Since the alternative employment option pays $8, the union is willing to suffer
a cut in employment in order to obtain a greater rent of $6 per hour ($8 up to $14).
10-3. Figure 10-2 demonstrates some of the tradeoffs involved when deciding to join a
union. Suppose in addition to higher wages the union negotiates a 10 percent employer
contribution to a defined contribution pension plan. Provide a graph similar to Figure 10-2
that incorporates this retirement benefit into the decision of whether to join a union. Show
on your graph how additional fringe benefits such as a retirement plan may cause the
worker to be more inclined to join the union.
Negotiating a 10% employer contribution to a defined contribution pension plan is almost the
same as negotiating an additional 10% increase in the wage. Thus, the budget line (BT) in Figure
10-2 will rotate out. As long as the firm does not respond by cutting hours too much (such as to
h0 in Figure 10-2), workers will have more incentive to join the union as they will receive higher
hourly compensation (though possibly asked to work fewer hours).
C
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B
P1
U1
h1 h2
T
The graph above is a simplified version of Figure 10-2 from the text. The negotiated contribution
rotates the budget line from BT to CT. As long as the firm does not reduce hours from h1 to less
than h2, the worker is better off.
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10-4. Consider a two-sector economy with homogeneous labor and jobs in both sectors. Two
million workers supply their labor perfectly inelastically. Labor demand in both sectors
can be written as:
E1 = 1,800,000 – 100,000w1 and E2 = 1,800,000 – 100,000w2.
(a) If both sectors are competitive, what is the market-clearly wage and how many workers
are employed in both sectors?
As labor demand is identical in both sectors and labor is homogeneous, 1 million workers will
work in both sectors. Using this for E in the labor demand equations, we find that
1,000,000 = 1,800,000 – 100,000w
100,000w = 800,000
w* = $8 per hour.
(b) Suppose a labor union forms in sector 1. The union negotiates a wage of $12 per hour,
and firms choose how much labor to employ. Anyone not employed in sector 1 is relegated
to sector 2. How many workers will be employed in sector 1 (unionized)? How many
workers will be employed in sector 2, and what wage will they receive?
At a wage of $12 per hour, the unionized sector (sector 1) will employ:
E1 = 1,800,000 – 100,000w1
E1 = 1,800,000 – 100,000 × 12
E1 = 1,800,000 – 1,200,000
E1* = 600,000 workers.
This forces 2 million – 0.6 million = 1.4 million workers into the non-unionized sector (sector 2).
With this many workers relegated to sector 2, wages are:
1,400,000 = 1,800,000 – 100,000w
100,000w = 400,000
w* = $4 per hour.
Therefore, 600,000 workers are employed at $12 per hour in the unionized sector while 1,400,000
workers are employed at $4 per hour in the non-unionized sector.
(c) What is the union-wage gap in part (b)? What would the union-wage effect be if one
controlled for the spillover effect?
Using the answers to part (b), the union-wage effect is ($12 – $4) / $4 = 200% (or it could be
expressed as $8 = $12 – $4 per hour as well).
The spillover effect refers to the infusion of workers into sector 2 because the union formed and
the unionized firms restricted labor. If we compare the union wage of $12 to the competitive
wage of $8 per hour that would have come about without a union (part a), the union-wage effect
is ($12 – $8) / $8 = 50% (or it could be expressed as $4 = $12 – $8 per hour as well).
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10-5. Consider a firm that faces a constant per unit price of $1,200 for its output. The firm
hires workers, E, from a union at a daily wage of w, to produce output, q, where
q = 2E½.
Given the production function, the marginal product of labor is 1/E½. There are 225
workers in the union. Any union worker who does not work for the firm can find a nonunion job paying $96 per day.
(a) What is the firm’s labor demand function?
The problem stipulates that the price of output is constant at $1,200. This means that the firm
also faces constant marginal revenue at $1,200. That is, p = MR = $1,200. The labor demand
function, or the value of marginal product of labor, is
VMPE = MR × MPE = 1200 / E ½.
(b) If the firm is allowed to specify w and the union is then allowed to provide as many
workers as it wants (up to 225) at the daily wage of w, what wage will the firm set? How
many workers will the union provide? How much output will be produced? How much
profit will the firm earn? What is the total income of the 225 union workers?
If the firm offers w < $96, no workers will be provided. This would leave the firm with no output and no profit. The workers would all receive $96 per day, making their total daily income $21,600. If the firm offers a wage of w > $96, all 225 workers will be provided. These 225 workers would
produce q = 2 × sqrt(E) = 2 × sqrt(225) = 30 units of output. The firm would then earn a profit of
30($1,200) – 225w. Profit, therefore, is maximized when w is minimized subject to the constraint.
If the union would supply all 225 workers at a wage of $96, for example, the firm would offer w
= $96 and earn a daily profit of $14,400. The total daily income of the 225 workers would remain
at $21,600. (If the firm needs to offer strictly more than $96 per day to attract workers, it would
offer a daily wage of $96.01. All 225 workers would work for the firm, making 30 units of
output. The firm’s daily profit would be $14,397.75. And the total daily income of the 225
workers would be $21,602.25.)
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10-6. Consider the same set-up as in problem 10-5, but now the union is allowed to specify
any wage, w, and the firm is then allowed to hire as many workers as it wants (up to 225) at
the daily wage of w. What wage will the union set in order to maximize the total income of
all 225 workers? How many workers will the firm hire? How much output will be
produced? How much profit will the firm earn? What is the total income of the 225 union
workers?
To solve this with Excel, the spreadsheet looks like the following, where the union specifies the
wage, labor demand comes from part (a), and everything else follows naturally:
Union
Labor
Labor
Daily
wage Demand
Costs Output
Price
Revenue
Profit
Income
$96
156.25 $15,000.00 25.00 $1,200 $30,000.00 $15,000.00 $21,600.00
$97
153.04 $14,845.36 24.74 $1,200 $29,690.72 $14,845.36 $21,753.04
$98
149.94 $14,693.88 24.49 $1,200 $29,387.76 $14,693.88 $21,899.88
$99
146.92 $14,545.45 24.24 $1,200 $29,090.91 $14,545.45 $22,040.77
$100
144.00 $14,400.00 24.00 $1,200 $28,800.00 $14,400.00 $22,176.00
…
…
…
…
…
…
…
…
$190
39.89 $7,578.95 12.63 $1,200 $15,157.89 $7,578.95 $25,349.58
$191
39.47 $7,539.27 12.57 $1,200 $15,078.53 $7,539.27 $25,349.90
$192
39.06 $7,500.00 12.50 $1,200 $15,000.00 $7,500.00 $25,350.00
$193
38.66 $7,461.14 12.44 $1,200 $14,922.28 $7,461.14 $25,349.90
$194
38.26 $7,422.68 12.37 $1,200 $14,845.36 $7,422.68 $25,349.60
$195
37.87 $7,384.62 12.31 $1,200 $14,769.23 $7,384.62 $25,349.11
Thus, the union sets a daily wage of $192. The firm responds by hiring 39.06 workers, who
produce 12.5 units of output. The firm earns a daily profit of $7,500, while the 225 workers,
39.06 of whom are in the union and 185.94 of whom are not in the union, earn a total of $25,350
each day.
The calculus solution is: given any wage, the firm will employ (1200/w)2 workers. This is
derived by setting the value of marginal product equal to the wage and solving for employment:
.
As the union’s objective is to maximize total income, it chooses w to maximize the income of the
workers employed by the union plus the income of the workers not employed by the union.
Therefore, we have:
2
2
?
138,240,000
? 1,200 ?
? 1,200 ? ?? 1,440 ,000
?
+ 21,600 ?
Max w?
.
? + 96 225 ? ?
? =
?
?
w
? w ?
? w ? ?
w2
?
The first order condition, therefore is
? 1,440 ,000
w
2
+
276 ,480 ,000
w3
= 0 which solves as w = $192.
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10-7. Suppose the union’s resistance curve is summarized by the following data. The union’s
initial wage demand is $10 per hour. If a strike occurs, the wage demands change as
follows:
Length of Strike:
1 month
2 months
3 months
4 months
5 or more months
Hourly Wage Demanded
9
8
7
6
5
Consider the following changes to the union resistance curve and state whether the
proposed change makes a strike more likely to occur, and whether, if a strike occurs, it is a
longer strike.
(a) The drop in the wage demand from $10 to $5 per hour occurs within the span of 2
months, as opposed to 5 months.
If the union is willing to drop its demands very fast, the firm will find it profitable to delay
agreement until the wage demand drops to $5. A strike, therefore, is more likely to occur. If $5 is
the lowest wage the union is willing to accept, the strike is much more likely to last 2 months now
than the probability it would have lasted 5 months under the original resistance curve.
(b) The union is willing to moderate its wage demands further after the strike has lasted for
6 months. In particular, the wage demand keeps dropping to $4 in the 6th month, $3 in the
7th month, etc.
If the union is willing to accept even lower wages in the future, some firms will find it optimal to
wait the union out. Thus, strikes will be more likely and last longer.
(c) The union’s initial wage demand is $20 per hour, which then drops to $9 after the strike
lasts one month, $8 after 2 months, and so on.
Conditioning on a strike occurring, the length of strike will be unchanged as the resistance curve
after the initial demand stays the same. The probability of a strike ever occurring increases,
however, when the initial demand increases but everything else remains the same.
10-8. At the competitive wage of $20 per hour, firms A and B both hire 5,000 workers (each
working 2,000 hours per year). The elasticity of demand is -2.5 and -0.75 at firms A and B
respectively. Workers at both firms then unionize and negotiate a 12 percent wage increase.
(a) What is the employment effect at firm A? How has total worker income changed?
At firm A, ?A = %?EA ÷ %?wA = -2.5. When wages increase 12%, therefore, employment falls
by 30%. The firm will start to employ 70% of 5000 × 2000 = 7 million work-hours per year,
possibly by hiring 3,500 workers for 2,000 hours each. Total income was 10 million work-hours
times the wage of $20 per hour for a total of $200 million. Total income will now be 7 million
work-hours times the new wage of $22.40 (a 12 percent increase above $20), for a total income of
$156.8 million plus any income earned by the workers who no longer work at firm A because of
the reduction in labor used.
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(b) What is the employment effect at firm B? How has total worker income changed?
At firm B, ?B = %?EB ÷ %?wB = -0.75. When wages increase 12%, therefore, employment falls
by 9%. The firm will start to employ 91% of 5000 × 2000 = 9.1 million work-hours per year,
possibly by hiring 4,550 workers for 2,000 hours each. Total income was 10m work-hours times
the wage of $20 per hour, for a total of $200 million. Total income will now be 9.1 million workhours times the new wage of $22.40 (a 12 percent increase above $20), for a total income of
$203.84 million plus any income earned by the workers who no longer work at firm B because of
the reduction in labor used.
(c) How much would the workers at each firm be willing to pay in annual union dues to
achieve the 12 percent gain in wages?
To answer this question, assume that reductions in employment come from reducing the number
of workers hired, and not by reducing the number of hours worked by each worker. So, for firm
A, assume the number of workers falls to 3,500 but hours remain at 2,000. Similarly, for firm B,
assume the number of workers falls to 4,550 but hours remain at 2,000. In this case, income has
increased from 2,000 x $20 = $40,000 per year per worker to
2,000 x $22.40 = $44,800 per year for each worker continuing to have a job. So, workers at
either firm, as long as they retain their job, are willing to pay up to $4,800 annually in union dues.
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10-9. Several states recently passed laws restricting bargaining rights for public employees.
Most notably the changes tended to restrict the union’s right to negotiate over fringe
benefits such as health care and retirement benefits. What problems were these legislative
changes trying to address? Even assuming such a law survives a constitutional challenge
(which some did not), why might restricting bargaining rights not fully address the
problems lawmakers were aiming to solve?
Following the Great Recession, many private employee labor contracts and conditions were
changed. Fewer fringe benefits were being paid—employees were asked to pay more of their
health insurance costs, and contributions to and benefits paid from retirement plans fell
(especially to and from defined benefit plans). Salary increases were marginal from 2007 – 2010.
And so on. It’s harder to have such shifts in the public sector in part because public organizations
are not arranged nor operate the same way as private firms. Public sector unions had also
negotiated terrific healthcare and retirement benefits in the decades leading up to the Great
Recession. The defined benefit retirement plans for public sector workers in many states became
vastly insolvent as benefits steadily increased at the same time state budgets became strapped due
to lower state tax revenues. Thus, the states that passed these laws did so because, in their mind,
the compensation package previously offered to public sector unions was out of line with the
private sector marketplace, and so out of line that the current state of things threatened state
solvency.
There are at least two reasons to think that these laws may not be as successful in lowering the
state burden in terms of public sector employee’s as advertised. First, the unions are still allowed
to bargain over salaries. As money (and compensation) is fungible, the union may demand that
cost-savings on healthcare or retirement be offset with higher direct salaries. Second, the unions
still have the right to strike and have significant political power. Thus, even though their
bargaining rights may be hypothetically restricted, it remains unclear if the state would actually
take hard stands during negotiations.
10
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10-10. Suppose the economy consists of a union and a non-union sector. The labor demand
curve in each sector is given by L = 1,000,000 – 20w. The total (economy-wide) supply of
labor is 1,000,000, and it does not depend upon the wage. All workers are equally skilled
and equally suited for work in either sector. A monopoly union sets the wage at $30,000 in
the union sector. What is the union wage gap? What is the effect of the union on the wage in
the non-union sector?
In a competitive economy, both sectors would hire half of the workers as labor is supplied
inelastically. Therefore, to solve for the competitive wage, solve
500,000 = 1,000,000 – 20w ? wComp = $25,000.
If the union wage is set at $30,000, the union sector employs
L = 1,000,000 – 20(30,000) = 400,000 union workers.
The remaining 600,000 must be employed in the non-union sector, which will happen if the wage
in the non-union sector is (1,000,000 – 600,000)/20 = $20,000.
Hence, the wage gap between the union and the non-union sectors equals:
Union Wage Gap: $30,000 – $20,000 = $10,000.
Thus, the union wage gap represents 50% of the non-union wage as $10,000 ÷ $20,000 = 50%.
The effect of the union wage gap is that more people now work in the non-union sector, which
depresses wages there. In particular, although the union only negotiated a pay raise of $5,000
above the competitive wage, the wage gap is $10,000 as the workers who no longer work in the
union sector compete wages down in the non-union sector.
10-11. In Figure 10-6, the contract curve is PZ.
(a) Does point P represent the firm or the workers having all of the bargaining power?
Does point Z represent the firm or the workers having all of the bargaining power?
Explain.
The firm’s isoprofit curves improve as it hires the same number of workers at a lower wage,
which means improvements are achieved by moving down (to the south). So, from the firm’s
perspective, ?* > ?M > ?Z.. From the union’s point of view, indifference curves increase to the
northeast (as more people are hired at the same wage or when the same number of people are
hired at a higher wage). Thus, from the union’s perspective, U* < UM < UR < UZ. Thus, point P represents the firm having all of the bargaining power, and point Z represents the union having all of the bargaining power. 11 ©McGraw-Hill Education. All rights reserved. Authorized only for instructor use in the classroom. No reproduction or further distribution permitted without the prior written consent of McGraw-Hill Education. (b) Suppose the union has the power to be a monopoly union in setting wages if it chooses, but it doesn’t have the power to force a wage and an employment level on the firm. On what portion of the contract curve PZ would you expect the bargained wage-employment contract to occur? The union sets the wage, but not the employment level. Thus, for any wage set by the union, the firm “sees” a horizontal line at w and maximizes its profit by choosing an employment level that gives the firm a position on its highest possible isoprofit line. Thus, the firm will choose a point on the line described by PM. Knowing this, the best the union can do is to set wage wM as the firm will then choose EM (not drawn in Figure 10-6, but associated with point M) which puts the outcome at point M and gives the union UM. At any other wage, the firm chooses a different employment level according to PM, all of which are associated with indifference curve levels lower than UM. 10-12. Consider the following data on union versus non-union wage and fringe benefit compensation. Union Workers Non-Union Workers Average Hourly Wage $21.91 $17.66 Average Hourly Fringe Benefit $13.69 $6.85 Total Hourly Compensation $35.60 $24.51 Calculate the union effect for hourly wages, hourly fringe benefits, and total hourly compensation. What might you infer from the various union-negotiated effects? The union wage effect is ($21.91 – $17.66) ÷ $17.66 = 24%. The union effect on total benefits is ($13.69 – $6.85) ÷ $6.85 = 99.9%. The union effect on total compensation is ($35.60 – $24.51) ÷ $24.51 = 45.2%. There are several conclusions to draw from this data. First, the union wage effect is substantial regardless if one is looking at wages, fringe benefits, or total compensation. Of these, the most important is likely fringe benefits, and the average worker is earning 45.2% more per hour in total compensation compared to non-union workers. Also, though, the data suggest that unions are relatively more successful at negotiating fringe benefits than they are at negotiating wage increases as the average unionized worker receives almost twice (100%) the value of fringe benefits compared to the average non-unionized worker while they “only” receive 24% more in wages. 12 ©McGraw-Hill Education. All rights reserved. Authorized only for instructor use in the classroom. No reproduction or further distribution permitted without the prior written consent of McGraw-Hill Education. 10-13. Use a graph similar to Figure 10-10 to demonstrate the likely bargaining outcomes of three industries, all with identical union resistance curves. (a) Firm A has been losing money recently as wages and fringe benefits have risen from 63 to 89 percent of all costs in just the last three years. (b) Most of firm B’s revenues come from supplying a product to three customers who use the product in their manufacturing of computers using a just-in-time inventory system. (c) Firm C is a local government that finds itself negotiating with its unionized employees. Government officials are pleased with the employees’ productivity, but they also face local pressure to keep taxes low. Firm A is likely to have very long and shallow isoprofit lines as it perceives that it cannot afford more pay increases. Firm B is vulnerable to union demands, because it will lose much of its revenue if it experiences a disruption in its production process as most of its output is sold to three firms that all use a justin-time inventory process. Thus, Firm B likely has very steeply sloped isoprofit lines. Firm C probably doesn’t care if it gives higher wages and benefits, as it can simply raise taxes to cover the costs. However, elected officials also feel pressure to keep taxes low and to at least look tough in negotiations with public employee unions. Thus, firm C is probably between firm A and firm B in terms of the steepness of its isoprofit lines. In particular, firm C is probably willing to bear short strikes but not long ones. Each of these resistance curves are plotted in the following graph. The graph shows that firm A is the most willing to endure a long strike and the least likely to agree to a high wage demand, while firm B is the least willing to endure a long strike and the most likely to agree to a high wage demand. Firm C is somewhere between the two on both issues. Dollars B C Union Resistance Curve A ?B ?C ?A Duration of Strike 13 ©McGraw-Hill Education. All rights reserved. Authorized only for instructor use in the classroom. No reproduction or further distribution permitted without the prior written consent of McGraw-Hill Education. 10-14. Major League Baseball players are not eligible for arbitration or free-agency until they have been in the league for several years. During these “restricted” years, a player can only negotiate with his current team. Consider a small-market team that happens to own the rights to last year’s Rookie-of-the-Year. This player is currently under contract for $500,000 for the next 3 years. Because his current team is in a small market, the player’s value to his current team is $6 million per year (now and in the future). When the player becomes eligible for free-agency, he will likely command $10 million per year for 7 years in free-agency from competing large-market teams. In the questions below, assume the player wants to maximize his lifetime earnings. (a) What is the worst 10-year contract extension from the player’s point of view that the player would accept from his current team? If the player decides to play out his current contract and then signs with a large-market team, he will earn 3 × $500,000 + 7 × $10,000,000 = $71.5 million. Thus, the worst 10-year contract extension from the player’s point of view that he would accept is $7.15 million dollars per year for 10 years. (b) What is the best 10-year contract extension from the player’s point of view that his current team would offer him? The best contract extension his current firm is willing to offer is $6 million per year for the next 10 years. (c) Would you expect this player to sign a contract extension or to play out his contract and enter free-agency three years from now? Given these numbers, if the player wants to maximize his earnings over the next 10 years (and assuming away discounting as the problem has done), the player will play out his current contract and then enter free-agency in order to sign with a large-market team. 10-15. Recently the National Football League Players Association (NFLPA), which is the union for the players in the National Football League (NFL), and the team owners (the NFL) experienced a labor impasse in the form of a lockout. For the record, each year about 150 players (called rookies) enter the NFL and 150 veteran players exit the league (via retirement or not making a team roster). While renegotiating the most recent labor settlement, the union took several stances. Explain why a union of players would advocate against: (a) Expanding the number of games played. Games played is analogous to hours worked. As NFL players are paid a salary, increasing the number of games played is effectively lowering each player’s hourly wage. A player who earns $1,440,000 per year, for example, is paid $90,000 per game. If the season were expanded to 18 games, the same player is now paid $80,000 per game. On this issue, the NFLPA publically argued that 18 games would cause substantially more physical damage to players over their playing careers (and felt for their lifetime) than does a 16 game schedule. 14 ©McGraw-Hill Education. All rights reserved. Authorized only for instructor use in the classroom. No reproduction or further distribution permitted without the prior written consent of McGraw-Hill Education. (b) Expanding the size of team rosters. One way a union negotiates higher wages for its members is to restrict entry into jobs. When rosters expand, more players are in the union, each competing for money paid by firms. At the extreme, with a team salary cap of $100,000,000 per year, a 53-man roster allows for an average salary of $1.886 million whereas a 57-man roster only allows for an average salary of $1.754 million. (c) A team salary cap. In all professional sports leagues, the players union objects to salary caps because salary caps are simply a way by which the owners regulate one another. In a purely competitive environment, the players believe that owners would spend more money on salaries. For the record, salary caps now exist to some degree, in the NFL (football), NBA (basketball), and NHL (hockey). Although baseball doesn’t have an official salary cap, it does have a luxury tax that penalizes clubs from spending too much more than average. (It also penalizes clubs for spending too little.) (d) A rookie salary cap. One of the strangest result of the NFL lockout, according to the media, was that the NFLPA was against a rookie salary cap. The argument (from the media) went: current players should support a rookie salary cap so that the real, on-the-field performers receive a greater share of the salaries. (JaMarcus Russell, the #1 overall pick in 2007 by the Oakland Raiders, was paid almost $40 million, played very little, played poorly when he did play, and was released in 2010.) A rookie salary cap would prevent such atrocities, and instead reward the players who have longer, more productive careers. So why did the NFLPA not support a rookie salary cap? The answer for economists is that the NFLPA understands that teams conduct marginal benefit– marginal cost analyses. If rookie salaries are kept artificially low, teams will have more incentive to employ rookies rather than, say, 4-year veterans. And although the NFLPA includes all of the NFL superstars, most of its members are 3- to 7-year veterans who are hoping to stay in the league for a few more years. These players know that if teams are given the opportunity of hiring a rookie for $50,000 or the marginally better but much more expensive 5-year veteran for $1,000,000, the team will go with the rookie. Therefore, in order to protect the jobs and salaries of a large part of the rank and file membership, the NFLPA advocated against a rookie salary cap. 15 ©McGraw-Hill Education. All rights reserved. Authorized only for instructor use in the classroom. No reproduction or further distribution permitted without the prior written consent of McGraw-Hill Education. 1 ECON 3100 Homework #3 100 points FIRST AND LAST NAME_______________________________________________________ 1) Nowadays, there are quite a few jobs that offer the benefit of telecommuting (working remotely, from a house or a coffee shop, for example), without the need to go to the office. And the number of such types of jobs is predicted to rise. 1a. List and briefly explain at least 2 arguments in support of the statement that more telecommuting jobs would INCREASE the job turnover (i.e. workers switching jobs). In your answer, please refer to the models, concepts, theories, etc. that have been covered in this class. Answer: (7 points) 1b. List and briefly explain at least 2 arguments in support of the statement that more telecommuting