Answered: For each of the wages listed in the…

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.

(c).

For each of the wages listed in the following table, determine the quantity of labor demanded, the quantity of labor supplied, and the direction of pressure exerted on wages in the absence of any price controls.

(d).

True or False: A minimum wage below $10 per hour is a binding minimum wage in this market. (Hint: Economists call a minimum wage that prevents the labor market from reaching equilibrium a binding minimum wage.)

For each of the wages listed in the following table, determine the quantity of labor demanded, the quantity of labor supplied, and the direction of
pressure exerted on wages in the absence of any price controls.
Wage
Labor Demanded
Labor Supplied
(Dollars per hour)
(Thousands of workers)
(Thousands of workers)
Surplus or Shortage of Labor
Pressure on Wages
8.
12
Upward
True or False: A minimum wage below $10 per hour is a binding minimum wage in this market. (Hint: Economists callan Downward
that prevents
the labor market from reaching equilibrium a binding minimum wage.)
O True
O False
O O

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

Equilibrium is set where demand is equal to supply in an economy. A surplus is a situation when the quantity demanded is lower than the quantity supplied in the market. A shortage is a situation when the quantity supplied is less than the quantity demanded.

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