Answered: (a). In this market, the equilibrium…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

The following graph shows the labor market in the fast-food industry in the fictional town of Supersize City. In a labor market, workers supply their labor to the market in exchange for wages, and their behavior is represented by the supply curve. Similarly, firms pay wages to obtain labor, and thus their behavior is represented by the demand curve. In this way, wages are the price of labor.

(a). In this market, the equilibrium hourly wage is $________, and the equilibrium quantity of labor is _______ thousand workers.

(b).

Suppose a senator introduces a bill to legislate a minimum hourly wage of $6. This type of price control is called a _________ (options: quota, price ceiling, tax, price floor).

Market for Labor in the Fast Food Industry
20
18
I Wage
(Dollars per hour)
Supply
6
16
Labor Demanded
(Thousands of
workers)
Labor Supplied
(Thousands of
workers)
406
210
14
12
10
8
Demand
6
4
2
70
140 210 280 350 420 490 560 630 700
LABOR (Thousands of workers)
WAGE (Dollars per hour)

Expert Solution

Step 1

The equilibrium market wage rate is at the intersection of the supply and demand for labour.

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