LABOR ECONOMICS
8th Edition
ISBN: 9781260004724
Author: BORJAS
Publisher: RENT MCG
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Question
Chapter 4, Problem 6P
a)
To determine
The market clearing wage rate, number of workers employed, and the
b)
To determine
The effect of minimum wage on the level of employment and producer surplus.
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The market for low-skilled workers is highly competitive, due to the high numbers of low skilled individuals. If the labor supply is given by the equation QS = 10W and measured per hour, and the demand for labor is given by the equation QD = 240 − 20W. Where Q measures the quantity of labor hired (in thousands of hours). Answer the following:
(a) At the market equilibrium what is the going wage rate and quantity of low-skilled labor being employed?
(b) If the union successfully forces a minimum wage increase of $9 per hour, at the new market equilibrium what will be the new quantity of labor hired and the quantity of any excess (demand or supply) of labor?
(c) At the $9 minimum wage how much deadweight loss is created?
(d) After the implementation of the $9 minimum wage, in terms of surplus how much better off are low-skilled workers and how much worse off are employers?
(e) If the minimum wage is set at $11 rather than $9 how does the deadweight loss and surplus change?
Consider the labor market. Suppose that the supply of labor is = 2 + H/2 and the demand for W=52−2H. Where W is wage and is hours worked.
Now suppose that the government levies a $5 per hour payroll tax on buyers of labor (firms).
Determine the worker (supplier) and firm (buyer) tax burdens.
Determine the deadweight loss associated with this payroll tax.
Market demand for Mandrake roots is given by Q=305-2P and marketsupply is given by Q=5P. The market is initially in equilibrium.The government imposes a price ceiling of $9.
What is the CHANGE in Producer Surplus due to the price ceiling?Assume competitive markets.
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