7.1 Suppose that Congress passes legislation making it more difficult for firms to fire workers. One kxample might be a law requiring severance pay for fired workers. The goal of this legislation is to reduce the rate of job separation without affecting the rate of job finding. Use this information to answer the following three questions. (Assume the size of the labor force remains constant.) If this legislation reduces the rate of job separation (s) without affecting the rate of job finding (f), how would the natural rate of unemployment change? 7.2. In the country of Richland, economy consists of two sectors: manufacturing and services. Demand for labor in manufacturing and services are described by these equations: Lm=130020Wm Ls=120020Ws where L is labor (in number of workers), W is the wage, and the subscripts denote the sector. The economy has 500 workers who are willing and able to work in either sector. a. If workers are free to move between sectors, what relationship will there be between Wm and Xs? b. Suppose that the condition in part (a) holds and wages adjust to equilibrate labor supply and labor demand. Calculate the wage and employment in each sector. c. Suppose a union establishes itself in manufacturing and pushes the manufacturing wage to $60. Calculate employment in the manufacturing sector. d. In the aftermath of the unionization of manufacturing, all workers who cannot get the highly paid union jobs move to the service sector. Calculate the employment and wage in the service sector. e. Now, suppose that workers have a reservation wage of $45 - that is, rather than taking a job at a wage below $45, they would rather wait for a $60 union job to open up. Calculate the wage and employment in each sector. What is the economy's unemployment rate? 7.1 Suppose that Congress passes legislation making it more difficult for firms to fire workers. One kxample might be a law requiring severance pay for fired workers. The goal of this legislation is to reduce the rate of job separation without affecting the rate of job finding. Use this information to answer the following three questions. (Assume the size of the labor force remains constant.) If this legislation reduces the rate of job separation (s) without affecting the rate of job finding (f), how would the natural rate of unemployment change? 7.2. In the country of Richland, economy consists of two sectors: manufacturing and services. Demand for labor in manufacturing and services are described by these equations: Lm=130020Wm Ls=120020Ws where L is labor (in number of workers), W is the wage, and the subscripts denote the sector. The economy has 500 workers who are willing and able to work in either sector. a. If workers are free to move between sectors, what relationship will there be between Wm and Xs? b. Suppose that the condition in part (a) holds and wages adjust to equilibrate labor supply and labor demand. Calculate the wage and employment in each sector. c. Suppose a union establishes itself in manufacturing and pushes the manufacturing wage to $60. Calculate employment in the manufacturing sector. d. In the aftermath of the unionization of manufacturing, all workers who cannot get the highly paid union jobs move to the service sector. Calculate the employment and wage in the service sector. e. Now, suppose that workers have a reservation wage of $45 - that is, rather than taking a job at a wage below $45, they would rather wait for a $60 union job to open up. Calculate the wage and employment in each sector. What is the economy's unemployment rate