Chapter 15, Problem 5DQ

Suppose a binding minimum wage is imposed on the labor market, then basic microeconomics predicts that, a shortage of labor will occur, hence unemployment increases. a surplus of labor will occur, hence unemployment increases. a shortage of labor will occur, hence unemployment decreases. a surplus of labor will occur, hence unemployment decreases.

Economic theory states that a wage set above the equilibrium will create a surplus of labor (unemployment).  Are unions creating a surplus of labor? Explain your answer.   Entrepreneurs absorb the risk of starting and running a company.  Is Kennedy right about allowing employers to set the wage and not the employee? Explain your answer.

The equilibrium price in the housing market is very high. What do you think will happen if the government imposes a very high price ceiling that is below but very close to the equilibrium price on the housing market, because a politician owns housing units in certain areas? How does that affect the poor and the market for housing?

Discuss the type of price floor that can be implemented by a government to protect vulnerable labour in a country from being exploited?

During a discussion several years ago on building a pipeline to Alaska to carry natural gas, the U.S. Senate passed a bill stipulating that there should be a guaranteed minimum price for the natural gas that would flow through the pipeline. The thinking behind the bill was that if private firms had a guaranteed price for their natural gas, they would be more willing to drill for gas and to pay to build the pipeline. Using the demand and supply framework, predict the effects of this price floor on the price, quantity demanded, and quantity supplied. With the enactment of this price floor for natural gas, what are some of the likely unintended consequences in the market? Suggest some policies other than the price floor that the government can pursue if it wishes to encourage drilling for natural gas and for a new pipeline in Alaska.

Are teenagers better off when a higher minimum wage enables some to earn higher wages but causes others to lose their jobs?