Principles of Economics (MindTap Course List)
8th Edition
ISBN: 9781305585126
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Chapter 19, Problem 2PA
To determine
Effect of minimum wage law.
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The minimum wage law may distort the market for non-skilled labor. To reduce the distortion, some economists suggest a two-tier minimum wage system, where employees over age 19 have a minimum wage and employees under age 20 could earn wages below that figure. Give two reasons why economists think the minimum wage affects the under-20 labor market more than others
Minimum-wage laws and unemployment
Consider the market for labor depicted by the demand and supply curves that follow.
Complete the following table with the quantity of labor supplied and demanded if the wage is set at $12.50. Then indicate whether this wage will result in a shortage or a surplus.
Suppose a senator considers introducing a bill to legislate a minimum hourly wage of $12.50.
Which of the following statements are true? Check all that apply.
Binding minimum wages cause structural unemployment.
in this labor market, a minimum wage of $9.50 would be binding.
In the absence of price controls, a surplus puts downward pressure on wages until they fall to equilibrium.
If the minimum wage is set at $12.50, the market will not reach equilibrium.
How would imposing a minimum wage below the market-clearing wage affect employment in a competitive labor market?
Group of answer choices
a. Employment would be unchanged because the market forces drive the wage to a higher level.
b. Employment would decrease as some workers who are willing to work at the lower competitive wage would no longer be able to find work.
there would be a shortage of labor
c. Employment would increase because setting a minimum wage below the market wage would increase the quantity of labor demanded
d. Employment would decrease because the quantity of labor supplied would decrease
Chapter 19 Solutions
Principles of Economics (MindTap Course List)
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- Using supply and demand analysis, show the effects a binding minimum wage in a labour market can have on wage and employment levels, VERY clearly.arrow_forwardAfter implementing the price floor ( in a minimum wage), the supply and demand model suggests that________for labor. 1-quantity supplied will be LESS than quantity demanded 2-quantity supplied will EQUAL quantity demanded 3-quantity supplied will be GREATER than quantity demandedarrow_forwardCritics of raising the minimum wage argue that A. minimum-wage laws are too expensive for local governments to administer. B. labor demand is inelastic so firms can adjust production. C. minimum-wage laws are imprecise in their ability to help the working poor. D. effective minimum-wage laws create a shortage of labor.arrow_forward
- On December 30, 1974, the hypothetical country Alpha decided to introduce a minimum wage policy. Cities with ID numbers 11, 23, 45, 57, 60, and 61 were randomly chosen to implement this minimum wage policy. The remaining cities in country Alpha did not adopt a minimum wage policy. You are asked to empirically and theoretically evaluate the impact of the introduction of the minimum wage in country Alpha on the labour market outcomes. Now suppose that there is mobility in the labour market in country Alpha and we are in the pre-minimum wage period. Country Alpha receives migrants from country Beta and these migrants are positively selected. a) Suppose country Alpha decides to adopt a welfare program to increase the minimum income of its workers. This minimum income is granted to all native workers, immigrant workers, and the new incoming immigrants. Using the Roy model, and ignoring how the program is funded, with the aid of a diagram, discuss how the welfare program changes the…arrow_forwardCompare and contrast the impact of a minimum wage law vs. a cash transfer program in the labor market. Show the difference using a supply and demand model.arrow_forwardOn December 30, 1974, the hypothetical country Alpha decided to introduce a minimum wage policy. Cities with ID numbers 11, 23, 45, 57, 60, and 61 were randomly chosen to implement this minimum wage policy. The remaining cities in country Alpha did not adopt a minimum wage policy. You are asked to empirically and theoretically evaluate the impact of the introduction of the minimum wage in country Alpha on the labour market outcomes. Assuming there is no labour mobility and using the basic model of minimum wage, how do you expect the introduction of this policy to change the existing equilibrium wage and employment rate in the affected cities?arrow_forward
- According to the Heritage Foundation report, what are two possible negative effects of an increase in the minimum wagearrow_forwardWill the TRAIN law lessen or worsen poverty and income inequality in the country of Philippines? How will the Filipino people benefit from the TRAIN Law?arrow_forwardUsing the fact, value, and policy model. Give me three facts, values, and policies on why the minimum wage in the United States should be raised.arrow_forward
- The legislature in a state in the South passes strong "right-to-work" laws that make it very difficult for unions to organize workers, so the wage is always equal to the market-clearing value. Except for this difference in legislation, the northern and southern states are very similar.The initial position of a supply-and-demand graph corresponds to the initial labor market condition in the southern state before the labor union negotiated the new, higher wage for workers in the northern state.Suppose that after the wage goes up in the northern state, some workers in the northern state lose their jobs and decide to move to the southern state. Which of the following groups are better off as a result of the union action in the northern state? (select all that apply) a) The original workers in the southern state b) Workers in the northern state employed at the union wage c) Employers in the northern state d) Workers who find new jobs in the southern statearrow_forwardConsider the information below on the labor market in a given country. Wage Rate/Hour Quantity Demanded of Labor Quantity Supplied of Labor $4 400 workers 75 workers $5 300 workers 125 workers $6 200 workers 200 workers $7 140 workers 250 workers $8 100 workers 300 workers $9 70 workers 350 workers $10 45 workers 400 workers If the government wanted to implement a minimum wage, which of the following potential minimum wage would be binding and affect the market? Group of answer choices $5 $4 $6 $7arrow_forwardSuppose 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.arrow_forward
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