In a Competitive Labor Market, Shirking on the Job Can

question 29

Essay

In a competitive labor market, shirking on the job can be a problem. In this market for labor services, the demand for labor is expressed as:
W =
where W is wage rate (dollars per hour) and L is number employed per unit of time. The no shirking constraint (NSC) is expressed as:
NSC =
where NSC is the minimum wage workers need not to shirk, and L is the number employed per unit of time. Assume that the labor force L^* = 150,000. Determine the following:
a. the level of unemployment that would result when firms pay the efficiency wage
b. the market clearing wage
c. the efficiency wage

---

Definitions:

Society's Production

The total output of goods and services produced by all sectors within a society or economy.

Capital Goods

Long-term assets such as machinery, buildings, and equipment purchased by companies to produce goods and services.

Consumer Goods

Consumer goods are products bought by individuals or households for personal use, such as clothing, food, and household items.

International Specialization

The practice of countries focusing on the production of goods and services for which they have a comparative advantage, leading to trade.