e. Economists employed by universities earn significantly
less than economists of similar skills employed by
commercial banks.
7. In trying to measure the extent to which labour unions are
responsible for increasing wages, economists use sophisticated
statistical methods to compare the wages of unionized workers
with those of non-unionized workers. Explain why it is not
legitimate simply to compare the average wage across the two
groups and attribute the difference to the effects of unionization.
8. Other things being equal, how would you expect each of the
following events to affect the size distribution of after-tax income?
a. An increase in unemployment
b. Rapid population growth in an already crowded city
c. An increase in food prices relative to other prices
d. An increase in employment-insurance benefits and
premiums
e. Elimination of the personal income-tax exemption for
interest earned within an RRSP or TFSA
9. Suppose there are only two industries in the economy. All
workers have the same skills and the same preferences. But the
jobs in the two industries are different. In the Pleasant industry,
working conditions are desirable (quiet, safe, and clean). In the
Grimy industry, working conditions are awful (noisy, unsafe, and
dirty).
a. Draw supply-and-demand diagrams for the labour market
in each industry.
b. In which industry are wages higher? Why?
