[Related to the Apply the Concept on page 587] In most jobs, the harder you work, the more you earn. Some workers would rather work harder and earn more; others would rather work less hard, even though as a result they earn less. Suppose, though, that all workers at a company fall into the “work harder and earn more” group. Suppose also that the workers all have the same abilities. In these circumstances, would output per worker be the same under an hourly wage compensation system as under a piece-rate system? Briefly explain.

Many people have predicted, using a model like the one in panel (b) of Figure 17.12 on page 590, that the price of natural resources should rise consistently over time in comparison with the prices of other goods because the demand curve for natural resources is continually shifting to the right, while the supply curve must be shifting to the left as natural resources are used up. However, the relative prices of most natural resources have not been increasing. Draw a graph showing the demand and supply for natural resources that can explain why prices haven’t risen even though demand has.

[Related to the Don’t Let This Happen to You on page 578] Joe Morgan is a sportscaster and former baseball player. After he stated that he thought the salaries of Major League Baseball players were justified, a baseball fan wrote the following to Rob Neyer, a sports columnist:

Mr. Neyer,

What are your feelings about Joe Morgan’s comment that players are justified in being paid what they’re being paid? How is it ok for A-Rod [Alex Rodriguez, at the time a player on the New York Yankees] to earn $115,000 per GAME while my boss works 80 hour weeks and earns$30,000 per year?

How would you answer this fan’s questions?

Adam operates a pin factory. Suppose that Adam faces the situation shown in the following table and that the cost of renting a machine is $550 per week.

Draw Adam’s demand curve for capital.

Research by economists Susan Helper, Morris Kleiner, and Yingchun Wang found that the use of pay-forperformance, or piece-rate pay, has declined in manufacturing industries in recent decades. In a summary of this research, Lester Picker explained, “This change has come about with the adoption of modern manufacturing systems in which firms produce a greater variety of products to a more demanding quality and delivery standard.”

Why would modern systems “in which firms produce a greater variety of products to a more demanding quality and delivery standard” than manufacturers used previously result in firms choosing to pay their workers salaries rather than use piece rates?

Research by economists Susan Helper, Morris Kleiner, and Yingchun Wang found that the use of pay-forperformance, or piece-rate pay, has declined in manufacturing industries in recent decades. In a summary of this research, Lester Picker explained, “This change has come about with the adoption of modern manufacturing systems in which firms produce a greater variety of products to a more demanding quality and delivery standard.”

What characteristics determine whether a salary system or a piece-rate system is likely to be more profitable for a manufacturing firm?

Adam operates a pin factory. Suppose that Adam faces the situation shown in the following table and that the cost of renting a machine is $550 per week.

Fill in the missing values in the table and determine the profit-maximizing number of machines for Adam to rent. Briefly explain why renting this number of machines is profit maximizing.

Uber, the ride-hailing service, increases the price of a ride when demand increases, as happens, for instance, on New Year’s Eve or during a snowstorm. An article in the New York Times discussed how new Uber drivers respond to fluctuations in the wages they earn: “Many of these drivers appeared to have an income goal in mind and stopped when they were near it, causing them to knock off sooner when their hourly wage was high and to work longer when their wage was low.” On the basis of this information, what does the labor supply curve for new Uber drivers look like? Draw a graph to illustrate your answer

[Related to the Chapter Opener on page 562] An article in the Wall Street Journal on the use of driverless trucks at Rio Tinto’s Australian mines observed, “The new equipment cut many driving jobs. But the reductions will be partly offset by new types of work. The company now needs more network technicians a hybrid of electrical and mechanical engineering that hardly existed five years ago.” Is it likely that total employment at Rio Tinto’s mines will have increased or decreased as a result of its use of robots? Are the average wages Rio Tinto pays likely to be higher or lower? Are the wages of the truck drivers who were replaced by robots likely to end up higher or lower in the drivers’ new jobs? Briefly explain your answers

What are the five most important variables that cause the market demand curve for labor to shift?

An article in the Wall Street Journal discussed why the hotel workers’ union in New York City was against a proposal for more hotels to be built in Midtown Manhattan: “The union is concerned that rapid hotel development shrinks room prices and profit margins, driving down the wages of its members.” Is the union’s reasoning consistent with the economic analysis in this chapter? Briefly explain.

In what sense do employers who discriminate pay an economic penalty? Is this penalty enough to eliminate discrimination? Briefly explain.

A study found that the number of jobs in which firms used bonuses, commissions, or piece rates to tie workers’ pay to their performance increased from an estimated 30 percent of all jobs in the 1970s to 40 percent in the 1990s. Why would systems that tie workers’ pay to how much they produce have become increasingly popular with firms? The same study found that these pay systems were more common in higher-paid jobs than in lower-paid jobs. Briefly explain this result.

Daniel was earning $65 per hour and working 45 hours per week. Then Daniel’s wage rose to$75 per hour, and as a result, he now works 40 hours per week. What can we conclude from this information about the income effect and the substitution effect of a wage change for Daniel?