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). Suppose a senator introduces a bill to legislate a minimum hourly wage of $8. This type of price control is called a ________ (options: price ceiling, quota, tax, price floor). (b). 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 (upward or downward) on wages in the absence of any price controls.Wage (dollars per hour)Labor demanded (thousands of workers)Labor supplied (thousands of workers)Surplus or shortage of laborPressure on wages (downward or upward)14 6 Graph Input ToolMarket for Labor in the Fast Food Industry2018I Wage(Doilars per hour)Supply16Labor Demanded(Thousands ofworkers)Labor Supplied(Thousands ofworkers)8003361412108Demand4280160 240 320 400 480 560 640 720 800LABOR (Thousands of workers)WAGE (Dollars per hour) Graph Input Tool(?Market for Labor in the Fast Food Industry2018I Wage(Doilars per hour)14Supply16Labor Demanded(Thousands ofworkers)Labor Supplied(Thousands ofworkers)4641412108Demand4280160 240 320 400 480 560 640 720 800LABOR (Thousands of workers)WAGE (Dollars per hour)

Answered: The following graph shows the labor…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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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). Suppose a senator introduces a bill to legislate a minimum hourly wage of $8. This type of price control is called a ________ (options: price ceiling, quota, tax, price floor).

(b). 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 (upward or downward) on wages in the absence of any price controls.

Wage (dollars per hour)	Labor demanded (thousands of workers)	Labor supplied (thousands of workers)	Surplus or shortage of labor	Pressure on wages (downward or upward)
14
6

Graph Input Tool
Market for Labor in the Fast Food Industry
20
18
I Wage
(Doilars per hour)
Supply
16
Labor Demanded
(Thousands of
workers)
Labor Supplied
(Thousands of
workers)
800
336
14
12
10
8
Demand
4
2
80
160 240 320 400 480 560 640 720 800
LABOR (Thousands of workers)
WAGE (Dollars per hour)

Graph Input Tool
(?
Market for Labor in the Fast Food Industry
20
18
I Wage
(Doilars per hour)
14
Supply
16
Labor Demanded
(Thousands of
workers)
Labor Supplied
(Thousands of
workers)
464
14
12
10
8
Demand
4
2
80
160 240 320 400 480 560 640 720 800
LABOR (Thousands of workers)
WAGE (Dollars per hour)

Expert Solution

Part a

Price Floor refers to the minimum legally allowable price for a good or service, set by the government. Sellers cannot charge a price lower than the price floor.

Suppose a senator introduces a bill to legislate a minimum hourly wage of $8. This type of price control is called a price floor.

Minimum Wage helps to protect low skilled, low wage workers by offering them a wage that is above the level determined by the market. It helps to safeguard the interests of workers.

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