Economics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN: 9781305506725
Author: James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher: Cengage Learning
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Chapter 4, Problem 7CQ
To determine
Black markets.
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Why is the black market a problem?
Discuss how minimum wage, one of the most popular price floors, specifically affects the labor market. (Be sure to briefly explain the labor market in your answer as it's a little different from other markets in terms of who we think of as on the demand and supply sides of the market.)
Under what circumstances would a minimum wage be a nonbinding price floor? Under what circumstances would a living wage be a binding price floor?
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Economics: Private and Public Choice (MindTap Course List)
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- What is the difference between the primary market and thesecondary market?arrow_forwardHow does a price floor below equilibrium affect the market? How does a price floor above equilibrium affect the market? Discuss how minimum wage, one of the most popular price floors, specifically affects the labor market. (Be sure to briefly explain the labor market in your answer as it's a little different from other markets in terms of who we think of as on the demand and supply sides of the market.)arrow_forwardWhy do some price controls help create black markets?arrow_forward
- Discuss the type of price floor that can be implemented by a government to protect vulnerable labour in a country from being exploited?arrow_forwardThe 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 othersarrow_forwardWill the price ceiling decrease the financial burden and poverty rate?arrow_forward
- After 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_forwardOn page 104 of the third (2019) edition of Naked Economics by Charles Wheelan, Wheelan discusses the possible outcomes of minimum wage. Based on what Wheelan has written and the conversations about minimum wage in the class, which of the below statements is the LEAST likely to be correct if the minimum wage (a price floor) is placed well above the market clearing (equilibrium) wage? Group of answer choices The higher the minimum wage is set above the market clearing or equilibrium rate the more likely it is benefit all workers, as everyone's wages will have increased, and employers will not lay off workers because of the higher wages. The higher minimum wage will benefit those who continue to have a job at the higher wage, but will hurt those who are laid off because employers will hire fewer workers at the higher wage rate. In an era of global production and a global labor pool in which wages in the U.S. are higher than the wages paid to workers in countries such as Mexico, the…arrow_forwardUsing a supply-demand diagram, show a labor market with a binding minimum wage. Now, use the diagram to show those who are helped by the minimum wage, and those who are hurt by the minimum wagearrow_forward
- c. If, in seeking to increase opportunities for lower income families, the government significantly increases subsidies available for individuals to pursue a college education, the point representing the equilibrium wage and quantity of workers will move up and to the right along the market supply curve for labor. the market supply curve for labor will shift to the right. the point representing the equilibrium wage and quantity of workers will move down and to the left along the market supply curve for labor. the market supply curve for labor will shift to the left.arrow_forwardMinimum-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.arrow_forwardHow 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 decreasearrow_forward
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