Congratulations! Based on Your Performance Advising the Prime Minister on Employment

question 17

Essay

Congratulations! Based on your performance advising the prime minister on employment related issues in the past, your contract has been renewed. This time your task is to analyze the effect of quasi-fixed labour costs on the demand for labour. In the report that you prepare for him or her, you should cover the following points.
• Define quasi-fixed labour costs and give some concrete examples.
• Explain intuitively the impact of quasi-fixed labour costs on labour market behaviour. You need not give a graph, but give some mention of the discounted present value of the stream of wages and the stream of the values of marginal product is desirable.
• The prime minister is very concerned about high unemployment and would like for you to explain why overtime is prevalent when employers could be meeting their labour force needs by hiring unemployed workers. He is also concerned about the growing use of casual and part-time labour rather than full-time labour. Do you have any policy recommendations that speak to this issue?

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Definitions:

Prisoners' Dilemma

A concept in game theory where two individuals acting in their own self-interest do not produce the optimal outcome, showcasing the conflict between personal and collective rationality.

Prisoners' Dilemma

A situation in game theory where two individuals acting in their own self-interest pursue a course of action that does not result in the ideal outcome for either party.

Tying

A practice where a seller requires the purchase of additional products or services in order to buy the desired product, often seen as anti-competitive.

Collude

Collusion involves cooperation between competing firms or entities to manipulate market conditions or prices in their favor, often detrimentally affecting market fairness and consumer interests.