The Following Table Includes Information on the Labor Market for Bakers

question 17

Essay

The following table includes information on the labor market for bakers. $\begin{array}{ccc}\text { Wage }&\text { Labor Demand }&\text { Labor Supply }\\\$ 10 & 50 & 10 \\\$ 15 & 45 & 20 \\\$ 20 & 40 & 40 \\\$ 25 & 35 & 70 \\\$ 30 & 30 & 110 \\\$ 35 & 25 & 160\end{array}$
a. What is the equilibrium wage and quantity of bakers in this market?
b. With the invention of instant teleportation, baker positions can be outsourced to countries with cheaper labor without sacrificing freshly baked goods. This reduces the labor demand for bakers by four-fifths. What is the new equilibrium wage and quantity of bakers hired?
c. Who wins in this situation in the short run? Who loses? What needs to happen in the long run so that the economic losers can benefit from outsourcing?

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Definitions:

EPS

Earnings Per Share; an indicator of a company's profitability, calculated as the company's net income divided by the number of its outstanding shares.

Capital Restructuring

Changing a firm’s capital structure intentionally by buying and selling stocks and bonds simultaneously.

Leverage

Leveraging borrowed money to enhance the expected gains from an investment.

Financial Risk

The chance of experiencing financial loss from an investment or enterprise because of different economic elements.