EBK MICROECONOMICS
9th Edition
ISBN: 8220103630955
Author: Rubinfeld
Publisher: PEARSON
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Question
Chapter 9, Problem 1E
(a)
To determine
Identify the free market wage rate and employment level.
(b)
To determine
Identify the effect of subsidy on the level of employment.
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Consider the labor market, i.e. the market for hours of work. When analyzing labor markets, price is just the hourly wage (e.g. 10 dollars an hour), and quantity is the number of hours demanded (by firms) or supplied (by workers).
Suppose the government imposes a minimum wage of $15 per hour.
If the demand and supply functions are given by Q = 25 - P and Q = -15 + P, where Q is in million hours and P is in dollars per hour, does the imposition of the minimum wage cause a deadweight loss in the market?
The demand for labor is L= 4000 - 300w, where L is the number of workers demanded and w is the hourly wage rate.
The supply of labor is L = 200w.
The equilibrium wage rate in this market is $ 8. and the equilibrium quantity of labor is 1600 workers. (Enter your responses as integers.)
A minimum wage law is passed that sets the minimum wage at $9 per hour. As a result, 1300 workers are demanded and 1800 workers are supplied, so
unemployment is 500 workers. (Enter your responses as integers.)
Do all workers benefit from the minimum wage law? No. because not everyone can find work at the higher wage.
Which group of workers will have the least dificulty finding work at the minimum wage?
A. Young and inexperienced warkers.
B. Low skilled workers.
C. Highly educated workers.
D. All of the above.
The deadweight loss from the minimum wage law is
(Enter your response as an integer.)
In this market, the equilibrium hourly wage is S
and the equilibrium quantity of labor is
thousand workers.
Suppose a senator introduces a bill to legislate a minimum hourly wage of $6. This type of price control is called a
For each of the wages listed in the following table, determine the quantity of labor demanded, the quantity of labor supplied, and the direction of
pressure exerted on wages in the absence of any price controls.
Wage
Labor Demanded
Labor Supplied
(Dollars per hour) (Thousands of workers) (Thousands of workers)
Pressure on Wages
12
True or False: A minimum wage below $10 per hour is not a binding minimum wage in this market.
True
O False
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