Consider a low-wage labor market. The current minimum wage is $12 per hour. Employment at this wage is 150,000. There are approximately 25,000 people unemployed in this market. The government is implementing a program to increase the number of swimming pools across the state. The program will create an estimated need for 5000 lifeguards, hired at the minimum wage as part of the government budget for this program. The government has mandated that all life guards hired to work at these new pools must come from the unemployed population. The reservation wage in this labor market is unknown. What would be the government expenditure on lifeguards? Does this expenditure represent that opportunity cost of this labor force? (Explain). What adjustment would be made to the government's expenditure to reflect a better estimate of the social opportunity cost of employing these resources?

Consider a low-wage labor market. The current minimum wage is $12 per hour. Employment at this wage is 150,000. There are approximately 25,000 people unemployed in this market. The government is implementing a program to increase the number of swimming pools across the state. The program will create an estimated need for 5000 lifeguards, hired at the minimum wage as part of the government budget for this program. The government has mandated that all life guards hired to work at these new pools must come from the unemployed population. The reservation wage in this labor market is unknown. What would be the government expenditure on lifeguards? Does this expenditure represent that opportunity cost of this labor force? (Explain). What adjustment would be made to the government's expenditure to reflect a better estimate of the social opportunity cost of employing these resources?

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter6: Supply, Demand And Government Policies

Section: Chapter Questions

Problem 8PA

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