Suppose an island economy has only two labour markets - fishing (high skill)and farming (low skill).There are 1000 males and 1000 females in the labour force.There is an equal distribution of skilled and non-skilled workers among each sex. FIGURE 14-1
-Refer to Figure 14-1.The two labour markets are each in a ________ equilibrium at point E.The wage differential between the industries is a(n)________ wage differential.

Question

Suppose an island economy has only two labour markets - fishing (high skill)and farming (low skill).There are 1000 males and 1000 females in the labour force.There is an equal distribution of skilled and non-skilled workers among each sex.  FIGURE 14-1
-Refer to Figure 14-1.The two labour markets are each in a ________ equilibrium at point E.The wage differential between the industries is a(n)________ wage differential.

Quizplus · Accepted Answer

Point E represents a competitive equilibrium in both labour markets, as the supply of workers for each market equals the demand for workers in each market. Therefore, the wage differential between the industries is a competitive wage differential, as it reflects the relative scarcity of high-skilled workers in the fishing market compared to low-skilled workers in the farming market. There is no indication of discrimination in the wage differential.

Suppose an Island Economy Has Only Two Labour Markets -