Answered: Suppose that Congress passes a law…

Macroeconomics: Private and Public Choice (MindTap Course List)

16th Edition

ISBN:9781305506756

Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Chapter4: Demand And Demand: Applications And Extensions

Section: Chapter Questions

Problem 12CQ

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Suppose that Congress passes a law requiring employers to provid

Suppose that Congress passes a law requiring employers to provide employees some benefit (such as healthcare) that raises the cost of an employee by $4 per hour.
a. What effect does this employer mandate have on the demand for labor? (In answering this and the following questions, be quantitative when you can.)
b. If employees place a value on this benefit exactly equal to its cost, what effect does this employer mandate have on the supply of labor?
c. If the wage is free to balance supply and demand, how does this law affect the wage and the level of employment? Are employers better or worse off? Are employees better or worse off?
d. Suppose that, before the mandate, the wage in this market was $3 above the minimum wage. In this case, how does the employer mandate affect the wage, the level of employment, and the level of unemployment?
e. Now suppose that workers do not value the mandated benefit at all. How does this alternative assumption change your answers to parts (b) and (c)?

Suppose that Congress passes a law requiring employers to provid

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