Consider an economy with the Cobb-Douglas production function: Y = 3K0.2L0.8 K = 140000; L=8000 Round answers to two places after the decimal when necessary. . Now suppose that Congress, concerned about the welfare of the working class, passes a law setting a minimum wage that is 9 percent above the current equilibrium wage. Assuming that Congress cannot dictate how many workers are hired at the nandated wage, calculate what happens to the real wage, employment, output, and the total amount earned by workers. Real wages = $ Total output = d. Does Congress succeed in its goal of helping the working class? O Yes, Congress does succeed in its goal of helping the working class. units No, Congress does not succeed in its goal of helping the working class. Employment = Total earned by workers = $ workers e. Does this analysis provide a good way of thinking about a minimum-wage law? O No, this analysis does not provide a good way of thinking about a minimum-wage law. Yes, this analysis does provide a good way of thinking about a minimum-wage law.

Consider an economy with the Cobb-Douglas production function: Y = 3K0.2L0.8 K = 140000; L=8000 Round answers to two places after the decimal when necessary. . Now suppose that Congress, concerned about the welfare of the working class, passes a law setting a minimum wage that is 9 percent above the current equilibrium wage. Assuming that Congress cannot dictate how many workers are hired at the nandated wage, calculate what happens to the real wage, employment, output, and the total amount earned by workers. Real wages = $ Total output = d. Does Congress succeed in its goal of helping the working class? O Yes, Congress does succeed in its goal of helping the working class. units No, Congress does not succeed in its goal of helping the working class. Employment = Total earned by workers = $ workers e. Does this analysis provide a good way of thinking about a minimum-wage law? O No, this analysis does not provide a good way of thinking about a minimum-wage law. Yes, this analysis does provide a good way of thinking about a minimum-wage law.

EBK HEALTH ECONOMICS AND POLICY

7th Edition

ISBN:9781337668279

Author:Henderson

Publisher:Henderson

Chapter14: Medical Care Systems Worldwide

Section: Chapter Questions

Problem 4QAP

See similar textbooks

Similar questions

What happens to a supply curve when price changes but structural variables remain fixed? Provide an economic interpretation of this case.
when companies elect to pay wages that are above the going market wage rate, this is likely to cause structural employment true of false?
Consider the following model of a competitive labour market where both firms and workers have perfect foresight and symmetric information about the price level (that is, no misperceptions). Firms' technology is given by the production function y = a N ½ (production function) where a is a positive constant representing total productivity, N is employment and the elasticity of production to employed labour is 1/2. The government requires firms to pay pension contributions to the fiscal authority: the contribution is a small fraction x of the wage paid to each employed worker. Therefore, firms profits equal P y - W N - x W N and they are maximized taking the price level P, the nominal wage W, and the pension contribution rate x as given. Labour supply is given by: W = P b N where b is a positive constant. Answer all the following questions. a) Derive the labour demand schedule by solving the profit maximization problem of firms.
By law, the government splits the levy of the FICA tax equally between workers and firms.(a) Using a supply and demand diagram, draw the labor market and label the equilibriumwage and employment level assuming FICA did not exist. Then, on the same graph,draw how the imposition of FICA alters labor market outcomes. Make sure to carefullylabel equilibrium wages, wages paid, wages received, and employment.(b) If the government splits the levy of the FICA tax evenly between workers and firms, thenhow is it that some researchers claim that workers pay approximately 90% of payrolltaxes?(c) Assume that labor unions lobby the government to have the entire levy of FICA shifted tofirms. Will workers ultimately be happy under this new tax structure? Why or why not?
Discuss Keynesian view of minimum wage legislation on employment.
In the United States, labor supply tends to be inelastic relative to labor demand, and according to law, payroll taxes are essentially assessed evenly between workers and firms. Given the above situation, are workers or firms more likely to bear the additional burden of an increased payroll tax in the United States? Could this burden be shifted to the firms by assessing the increase in payroll taxes on just firms rather than having firms and workers continue to be assessed payroll taxes equally?
Consider a state, its economy is largely based on two sectors, e.g. manufacturing and services. Most of local labor forces are employed in either automobile manufacturers or traditional service industries (catering, education, retail and state employees). At state level, total employment is 1.6 million (or 1600 thousand). Demand functions for labor force in manufacturing (M) and service (S) are given as following. Demand for labor in manufacturing (thousand), with wage as Wm ($/week). M = 4000 – 3 * Wm. Demand for labor in service (thousand), with wage as Ws ($/week). S = 2000 – 2 * Ws. As above, total employed labor is 1,600 (thousand), so we have M + S = 1600 (thousand). Then finish the following questions. (1) If labor forces are free to move between manufacturing and service sectors, what relationship is between wages in manufacture and service sectors, Wm and Ws (higher, lower or the same)? And why? (2) Following the condition in…
Suppose the supply curve of physicists is given by w=10+5E, while the demand curve is given by w = 50 -3E. Calculate the equilibrium wage and employment level. Suppose now that the demand for physicists increases to w = 70-3E. Assume the market is subject to cobwebs. Calculate the wage and employment level in each round as the wage and employment levels adjust to the demand shock. (Recall that each round occurs on the demand curve - when the firm posts a wage and hires workers). What is the new equilibrium wage and employment level?
Proponents of the minimum wage argue that it will not reduce employment. Opponents argue the opposite. What factor determines who is correct in this debate, and under what condition will each side be correct? Use a diagram to explain your answer. Proponents of the minimum wage argue that it will not cause unemployment. Opponents argue the opposite. What two factors determines who is correct in this debate, and under what conditions will each side be correct? Use a diagram to explain your answer. Proponents of the minimum wage argue that it will not create deadweight loss. Opponents argue the opposite. Under what condition will each side be correct. In light of this, what do you conclude are the likely effects of a minimum wage?
The “natural” rate of unemployment is the unemployment rate toward which the economy gravitates in the a. short run, and the natural rate is not necessarily the socially optimal rate of unemployment. b. long run, and the natural rate is not necessarily the socially optimal rate of unemployment. c. long run, and the natural rate is the socially optimal rate of unemployment. d. short run, and the natural rate is the socially optimal rate of unemployment.
Consider a Ricardian framework with two countries, A and B, and two products, G1 and G2. The following table shows the marginal product of labour in G1 and G2 in both countries. G1 G2 Country A 3 7 Country B 7 5 Which one of the following independent scenarios is not possible at the trade equilibrium? A.Compared to autarky, country A workers receive the same real wage in G2. B.Relative price of G1 is 8/3. C.Compared to autarky, country B workers receive higher real wage in G1. D.Relative price of G1 is 5/7.
Use the wage curve and the profit curve to show the equilibriumin a model of the labour market. Explain briefly why this equilibrium implies involuntary unemployment.