Answered: Minimum-wage laws and unemployment…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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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.

Graph Input Tool
Market for Labor
20.0
I Wage
(Dollars per hour)
17.5
Supply
12.50
Labor Demanded
(Thousands of
workers)
Labor Supplied
(Thousands of
workers)
15.0
375
625
12.5
10.0
7.5
Demand
5.0
2.5
125
250
375
500
625
750
875
1000
LABOR (Thousands of workers)
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.
Hint: Be sure to pay attention to the units used on the graph and in the table. For example, type in 100 for 100,000 workers.
Labor Demanded
Labor Supplied
Wage
(Thousands of workers)
(Thousands of workers)
Shortage or Surplus?
$12.50
WAGE (Dollars per hour)

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.
Hint: Be sure to pay attention to the units used on the graph and in the table. For example, type in 100 for 100,000 workers.
Labor Demanded
Labor Supplied
Wage
(Thousands of workers)
(Thousands of workers)
Shortage or Surplus?
$12.50
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 the equilibrium.
If the minimum wage is set at $12.50, the market will not reach equilibrium.

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