Principles of Economics (12th Edition)
12th Edition
ISBN: 9780134078779
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Question
Chapter 18, Problem 7.2P
To determine
Identify the impact of minimum wage law in an economy.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Bill raising federal minimum wage to $15 heads to U.S. House floor
The bill to gradually raise the federal minimum wage to $15 from $7.25 by 2024 has cleared a legislative hurdle that sets it up for a vote by the House of Representatives in the coming weeks.
What will be the effects of a $15 an hour minimum wage?
If the minimum wage rate of $15 is above the equilibrium wage rate, then setting the minimum wage at $15 an hour will
O A. minimize the resources used in job search
O B. increase employment and eliminate any deadweight loss
O C. increase unemployment and create a deadweight loss
O D. create an efficient labor market
O E. increase the number of low-skilled jobs available
With a $15 minimum wage,
O A. all workers gain
O B. all employers and workers lose
OC. only small businesses lose
O D. all workers and businesses gain
O E. employers lose and workers who can't find jobs lose. Workers who find jobs gain
The market equilibrium wage is currently $12 per hour among hairdressers. At that wage, 17,323 hairdressers are currently employed in the state. The state legislature then sets a minimum wage of $11.50 per hour for hairdressers. If there are no changes to either the demand or supply for hairdressers when that minimum wage is imposed, the number of hairdressers employed in the state will be: a. Fewer than 17,323. b. Still 17,323. c. More than 17,323. d. This is a bilateral monopsony so you can’t tell.
A case study in this chapter discusses the federal minimum-wage law.
Suppose the minimum wage is $7 per hour in the market for unskilled labor, as shown on the following graph.
Use the grey point (star symbol) to indicate the market equilibrium wage and quantity of labor in the absence of a minimum wage. Then use the purple point (diamond symbol) to indicate the level of employment at the minimum wage provided, and use the orange point (square symbol) to indicate the quantity of labor supplied at this minimum wage. Finally, use the green polygon (triangle symbols) to show the total wage payments to unskilled workers.
Market EquilibriumMinimum Wage OutcomeLabor Supplied at Minimum WageTotal Wage Payments012345678910109876543210Wage (Dollars per hour)Quantity of Labor （Millions of workers)DemandSupplyMinimum Wage
At the minimum wage of $7 per hour, the level of unemployment is
million workers, and the total wage payments to workers are
million.
Now suppose the…
Chapter 18 Solutions
Principles of Economics (12th Edition)
Knowledge Booster
Similar questions
- The minimum wage is typically set above the market-clearing wage in the market for labor. Using a graph with an upward-sloping supply of labor, a downward-sloping demand for labor, with the quantity of labor measured on the horizontal axis and the wage rate on the vertical axis, show the effect on the labor market of a minimum wage set above the equilibrium wage rate. Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.arrow_forwardConstruct a supply and demand graph illustrating the effects of a $7.25 minimum wage . Use $6.00 as an equilibrium wage/ hourarrow_forwardOn page 104 of the third (2019) edition of Naked Economics by Charles Wheelan, Wheelan discusses the possible outcomes of minimum wage. Based on what Wheelan has written and the conversations about minimum wage in the class, which of the below statements is the LEAST likely to be correct if the minimum wage (a price floor) is placed well above the market clearing (equilibrium) wage? Group of answer choices The higher the minimum wage is set above the market clearing or equilibrium rate the more likely it is benefit all workers, as everyone's wages will have increased, and employers will not lay off workers because of the higher wages. The higher minimum wage will benefit those who continue to have a job at the higher wage, but will hurt those who are laid off because employers will hire fewer workers at the higher wage rate. In an era of global production and a global labor pool in which wages in the U.S. are higher than the wages paid to workers in countries such as Mexico, the…arrow_forward
- to finance a new health insurance program, the government of Millonia imposes a new $2-per-hour payroll tax to be paid by employers. What do you expect to happen to wages and the size of the workforce? Explain How will this answer change in markets where labor is inelastically demanded? Explainarrow_forwardAssume that the supply of electrical technicians is low so a firm hires a group of them at $18 per hour. Two years later, due to a recession, the supply of technicians is high so the market rate for them is now $15 per hour. Should the firm pay new hires $18 or $15? Given that the firm bases pay on supply and demand, should it lower the pay of existing mechanics to $15arrow_forwardAccording to the Heritage Foundation report, what are two possible negative effects of an increase in the minimum wagearrow_forward
- Compare the two labor market graphs below, representing the supply and demand of low-skilled labor, medium-skilled labor, and high-skilled labor respectively. The y-axis is the price of labor ($ per hour) and the X-axis is the number of jobs (in 100,000 jobs). How will the impact of this increase in the minimum wage affect each of these markets?arrow_forwardWhat are the possible effects of minimum wage increase to the economy?arrow_forwardThe following graph shows the labor market for research assistants in the fictional country of Collegia. The equilibrium wage is $10 per hour, and the equilibrium number of research assistants is 200. Suppose the government has decided to institute a $4-per-hour payroll tax on research assistants and is trying to determine whether the tax should be levied on the employer, the workers, or both (such that half the tax is collected from each side). Use the graph input tool to evaluate these three proposals. Entering a number into the Tax Levied on Employers field (initially set at zero dollars per hour) shifts the demand curve down by the amount you enter, and entering a number into the Tax Levied on Workers field (initially set at zero dollars per hour) shifts the supply curve up by the amount you enter. To determine the before-tax wage for each tax proposal, adjust the amount in the Wage field until the quantity of labor supplied equals the quantity of labor demanded. You will not be…arrow_forward
- Explain why it is important to differentiate between the "number of unskilled workers" and the "number of unskilled labor hours" when evaluating the impact on the market for unskilled labor of an increase in minimum wage.arrow_forwardDraw a supply-demand diagram representing the impact of a minimum wage in the labor market. What does economic theory predict about the change in employment with the introduction of or increase in a minimum wage? How does the prediction above vary with elasticity of labor supply and labor demand?arrow_forwardCompare the three labor market graphs below, representing the supply and demand of low-skilled labor, medium-skilled labor, and high-skilled labor respectively. The y-axis is the price of labor ($ per hour) and the X-axis is the number of jobs (in 100,000 jobs). How will the impact of this increase in the minimum wage affect each of these markets?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
