Principles of Economics (12th Edition)
12th Edition
ISBN: 9780134078779
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
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Chapter 18, Problem 7.2P
To determine
Identify the impact of minimum wage law in an economy.
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Bill raising federal minimum wage to $15 heads to U.S. House floor
The bill to gradually raise the federal minimum wage to $15 from $7.25 by 2024 has cleared a legislative hurdle that sets it up for a vote by the House of Representatives in the coming weeks.
What will be the effects of a $15 an hour minimum wage?
If the minimum wage rate of $15 is above the equilibrium wage rate, then setting the minimum wage at $15 an hour will
O A. minimize the resources used in job search
O B. increase employment and eliminate any deadweight loss
O C. increase unemployment and create a deadweight loss
O D. create an efficient labor market
O E. increase the number of low-skilled jobs available
With a $15 minimum wage,
O A. all workers gain
O B. all employers and workers lose
OC. only small businesses lose
O D. all workers and businesses gain
O E. employers lose and workers who can't find jobs lose. Workers who find jobs gain
The market equilibrium wage is currently $12 per hour among hairdressers. At that wage, 17,323 hairdressers are currently employed in the state. The state legislature then sets a minimum wage of $11.50 per hour for hairdressers. If there are no changes to either the demand or supply for hairdressers when that minimum wage is imposed, the number of hairdressers employed in the state will be: a. Fewer than 17,323. b. Still 17,323. c. More than 17,323. d. This is a bilateral monopsony so you can’t tell.
A case study in this chapter discusses the federal minimum-wage law.
Suppose the minimum wage is $7 per hour in the market for unskilled labor, as shown on the following graph.
Use the grey point (star symbol) to indicate the market equilibrium wage and quantity of labor in the absence of a minimum wage. Then use the purple point (diamond symbol) to indicate the level of employment at the minimum wage provided, and use the orange point (square symbol) to indicate the quantity of labor supplied at this minimum wage. Finally, use the green polygon (triangle symbols) to show the total wage payments to unskilled workers.
Market EquilibriumMinimum Wage OutcomeLabor Supplied at Minimum WageTotal Wage Payments012345678910109876543210Wage (Dollars per hour)Quantity of Labor （Millions of workers)DemandSupplyMinimum Wage
At the minimum wage of $7 per hour, the level of unemployment is
million workers, and the total wage payments to workers are
million.
Now suppose the…
Chapter 18 Solutions
Principles of Economics (12th Edition)
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