**Problem 7.** Suppose the minimum wage is imposed as a price floor in the labor market. For each potential price floor in the graph ($14, $15, and $16), determine:7.1. What is the wage rate going to be in the market? Why?7.2. What is the quantity supplied and quantity demanded at that wage rate?7.3. What is the quantity of labor actually traded at that wage rate? Why?7.4. Will there be a surplus or shortage of labor, and how much?7.5. Is this price floor effective and why?### Explanation of the GraphThe graph illustrates the labor market with the following components:- **Axes**: - The vertical axis represents the *Wage rate*, ranging from $14 to $16. - The horizontal axis represents the *Quantity of labor* (in thousands), ranging from 0 to 200.- **Lines**: - The **Supply curve (S)** slopes upward, indicating that as wage rates increase, the quantity of labor supplied increases. - The **Demand curve (D)** slopes downward, indicating that as wage rates increase, the quantity of labor demanded decreases.- **Equilibrium**: - The intersection of the supply and demand curves indicates the equilibrium wage and labor quantity in the absence of a price floor.- **Price Floor Levels**: - Three price floors are marked at $14, $15, and $16. - At each price floor: - **$14**: Quantity supplied is approximately 110, and quantity demanded is approximately 90. - **$15**: Quantity supplied is approximately 120, and quantity demanded is approximately 80. - **$16**: Quantity supplied is approximately 130, and quantity demanded is approximately 70.This graph helps analyze the effects of imposing a minimum wage as a price floor, showing potential surpluses in labor at various wage rates.

“Since you have posted a question with multiple sub-parts, we will solve first three subparts for…

Problem 7. Suppose the minimum wage is imposed as a price floor in the labor market. For each potential price floor in the graph ($14, $15, and $16), determine: 7.1. What is the wage rate going to be in the market? Why? 7.2. What is the quantity supplied and quantity demanded at that wage rate? 7.3. What is the quantity of labor actually traded at that wage rate? Why? 7.4. Will there be a surplus or shortage of labor, and how much? 7.5. Is this price floor effective and why? Wage rate $16 15 14 S

Problem 7. Suppose the minimum wage is imposed as a price floor in the labor market. For each potential price floor in the graph ($14, $15, and $16), determine: 7.1. What is the wage rate going to be in the market? Why? 7.2. What is the quantity supplied and quantity demanded at that wage rate? 7.3. What is the quantity of labor actually traded at that wage rate? Why? 7.4. Will there be a surplus or shortage of labor, and how much? 7.5. Is this price floor effective and why? Wage rate $16 15 14 S

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

**Problem 7.** Suppose the minimum wage is imposed as a price floor in the labor market. For each potential price floor in the graph ($14, $15, and $16), determine:

7.1. What is the wage rate going to be in the market? Why?

7.2. What is the quantity supplied and quantity demanded at that wage rate?

7.3. What is the quantity of labor actually traded at that wage rate? Why?

7.4. Will there be a surplus or shortage of labor, and how much?

7.5. Is this price floor effective and why?

### Explanation of the Graph

The graph illustrates the labor market with the following components:

- **Axes**:
- The vertical axis represents the *Wage rate*, ranging from $14 to $16.
- The horizontal axis represents the *Quantity of labor* (in thousands), ranging from 0 to 200.

- **Lines**:
- The **Supply curve (S)** slopes upward, indicating that as wage rates increase, the quantity of labor supplied increases.
- The **Demand curve (D)** slopes downward, indicating that as wage rates increase, the quantity of labor demanded decreases.

- **Equilibrium**:
- The intersection of the supply and demand curves indicates the equilibrium wage and labor quantity in the absence of a price floor.

- **Price Floor Levels**:
- Three price floors are marked at $14, $15, and $16.
- At each price floor:
- **$14**: Quantity supplied is approximately 110, and quantity demanded is approximately 90.
- **$15**: Quantity supplied is approximately 120, and quantity demanded is approximately 80.
- **$16**: Quantity supplied is approximately 130, and quantity demanded is approximately 70.

This graph helps analyze the effects of imposing a minimum wage as a price floor, showing potential surpluses in labor at various wage rates.

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