Question 1

Suppose the current equilibrium wage rate for housekeepers is $8.60 per hour. An increase in the minimum wage to $7.50 per hour leads to
A)a surplus of housekeepers.
B)a shortage of housekeepers.
C)no change in the market for housekeepers.
D)an increase in the quantity of housekeepers supplied.
E)unemployment of housekeepers.

Accepted Answer

The current equilibrium wage rate for housekeepers is $8.60 per hour. An increase in the minimum wage to $7.50 per hour will not have an impact on the market because it is still below the equilibrium wage rate. There will not be a surplus or shortage of housekeepers, nor will there be an increase in the quantity of housekeepers supplied. Additionally, there is no reason to believe that unemployment will occur. Therefore, the market for housekeepers will remain unchanged.

Question 2

A minimum wage law in a competitive labor market
A)creates a shortage of labor.
B)causes equality between the quantity of labor supplied and the quantity demanded.
C)creates a surplus of labor.
D)lowers the wage rate paid to workers.
E)has an impact only if it is set below the equilibrium wage rate.

Accepted Answer

A minimum wage law above the equilibrium wage rate creates a surplus of labor because it increases the quantity of labor supplied by workers while decreasing the quantity of labor demanded by employers. Employers face higher costs, causing them to reduce their demand for workers, resulting in a surplus of labor.

Question 3

A stated goal of a minimum wage is to
A)increase government tax revenue.
B)stabilize production costs.
C)boost the incomes of low-wage earners.
D)decrease business profits.
E)increase business profits by making the labor market more efficient.

Accepted Answer

The stated goal of a minimum wage is to boost the incomes of low-wage earners by setting a baseline wage that employers must pay their employees. This is meant to provide a basic standard of living for those workers and reduce poverty levels. However, it could also potentially increase production costs and potentially decrease business profits if employers are unable to absorb the added cost of higher wages.

Question 4

A minimum wage increases unemployment by
A)increasing the quantity of labor demanded.
B)decreasing the quantity of labor demanded.
C)shifting only the labor supply curve rightward.
D)shifting only the labor demand curve leftward.
E)shifting the labor supply curve rightward and shifting the labor demand curve leftward.

Accepted Answer

When minimum wage is increased, it raises the cost of labor for employers, leading to a decrease in the quantity of labor demanded. This can lead to unemployment as some workers may lose their jobs or find it harder to obtain new employment.

Question 5

Suppose the equilibrium wage rate for apricot pickers is $9.00 per hour in California and at that wage rate the equilibrium quantity of apricot pickers is 14,000. If the minimum wage is set at $7.50 per hour, then
A)the quantity of apricot pickers employed increases.
B)the quantity of apricot pickers employed decreases.
C)the quantity of apricot pickers employed does not change.
D)the wage rate for apricot pickers increases.
E)some apricot pickers are unemployed.

Accepted Answer

Since the minimum wage of $7.50 is below the equilibrium wage of $9.00, it does not affect the market, and the quantity of apricot pickers employed remains at the equilibrium level of 14,000.

Question 6

A price floor is
A)the highest possible legal price that can be charged for a good or service.
B)usually equal to the equilibrium price established before the government imposed the price floor.
C)the lowest legal price at which a good or service can be traded.
D)a legal price of zero that can be charged for a good or service.
E)almost always equal to the price ceiling.

Accepted Answer

A price floor is a government-imposed regulation that prevents a price from falling below a certain level, which is the "floor." This means that the price cannot be traded below this level, which creates a minimum price for the good or service. Therefore, option C is the correct answer as it represents the lowest legal price at which a good or service can be traded.

Question 7

Suppose the current equilibrium wage rate for landscapers is $6.65 in Little Rock; $7.50 in St. Louis and $9.05 in Raleigh. An increase in the minimum wage to $7.50 per hour results in unemployment of landscapers in
A)Little Rock and St. Louis.
B)only Raleigh.
C)Little Rock, St. Louis, and Raleigh.
D)only Little Rock.
E)St. Louis and Raleigh.

Accepted Answer

An increase in the minimum wage to $7.50 will only cause unemployment in Little Rock where the current equilibrium wage is below $7.50. In St. Louis and Raleigh, the equilibrium wages are already at or above $7.50, so the minimum wage increase would not directly cause unemployment there.

Question 8

Suppose the equilibrium price of a gallon of milk is $4. If the government imposes a price floor of $5 per gallon of milk, the
A)quantity supplied of milk falls short of the quantity demanded.
B)quantity supplied of milk exceeds the quantity demanded.
C)supply increases.
D)demand decreases.
E)price of milk remains $4 per gallon.

Accepted Answer

A price floor set above the equilibrium price ($5 instead of $4) causes the quantity supplied to exceed the quantity demanded because producers are willing to supply more at the higher price, but consumers are not willing to buy as much at that price, leading to a surplus.

Question 9

A price floor set above the equilibrium price
A)creates a surplus.
B)creates a shortage.
C)creates excess demand.
D)balances supply and demand.
E)has no effect.

Accepted Answer

A price floor set above the equilibrium price creates a minimum legal price that sellers can charge for the good. This legal price is above the market price, causing a surplus, as the quantity supplied exceeds the quantity demanded at the higher price.

Question 10

-The figure above shows the labor market in a region. If a minimum wage of $8 an hour is imposed, then the quantity of labor supplied is ________ and the quantity of labor demanded is ________.
A)60,000; 60,000
B)80,000; 40,000
C)40,000; 60,000
D)60,000; 40,000
E)40,000; 40,000

Accepted Answer

When a minimum wage of $8 an hour is imposed, it typically results in a higher quantity of labor supplied than the equilibrium quantity because more people are willing to work at the higher wage. However, employers demand less labor at this higher wage than at the equilibrium wage, leading to a surplus of labor. Therefore, the quantity of labor supplied increases to 80,000, while the quantity of labor demanded decreases to 40,000.

Question 11

Why do some workers lose their job when a minimum wage level is increased?
A)The increase in labor costs decreases the supply of the product, thereby raising the price of the good so that the equilibrium quantity decreases to zero.
B)The increase in the wage rate decreases the quantity of labor demanded.
C)The demand for labor is perfectly inelastic.
D)The supply of labor decreases.
E)The demand for labor is perfectly elastic.

Accepted Answer

When the minimum wage level is increased, it increases the cost of hiring workers for employers. As a result, some employers will reduce their demand for labor by either reducing the number of workers they employ or by reducing the number of hours worked by each employee. This can result in some workers losing their jobs. This decrease in demand for labor is reflected in a leftward shift of the demand curve for labor, resulting in a lower equilibrium wage rate and level of employment.

Question 12

A price floor makes prices
A)below the price floor illegal.
B)above the price floor illegal.
C)below the equilibrium price illegal.
D)above the equilibrium price illegal.
E)None of the above answers is correct.

Accepted Answer

A price floor sets a minimum price for a good or service, making it illegal to trade the good or service at a price below the floor.

Question 13

-The figure above shows the labor market in a region. For a minimum wage to change the wage rate and amount of employment, it must be
A)left to the forces of supply and demand.
B)set above $6 an hour.
C)set equal to $6 an hour.
D)set below $6 an hour.
E)set at $12 per hour.

Accepted Answer

For a minimum wage to impact the wage rate and employment levels, it must be set above the equilibrium wage rate. In this case, if the equilibrium wage (where supply equals demand) is $6 an hour, setting the minimum wage above this amount (option B) would directly affect both the wage rate and the amount of employment, as it would force employers to pay more than the market rate, potentially leading to reduced employment.

Question 14

Suppose the equilibrium wage rate for apricot pickers is $7.00 per hour and at that wage rate the equilibrium quantity of apricot pickers employed is 14,000. If the minimum wage is set at $7.50 per hour, then the
A)quantity of apricot pickers employed increases.
B)quantity of apricot pickers employed decreases.
C)quantity of apricot pickers employed does not change.
D)wage rate for apricot pickers decreases.
E)quantity of apricot pickers demanded does not change and the quantity of apricot pickers supplied does not change.

Accepted Answer

When the minimum wage is set above the equilibrium wage rate, it increases the cost of hiring workers, leading to a reduction in the quantity of apricot pickers demanded. As a result, the quantity of apricot pickers employed decreases. In this case, the minimum wage of $7.50 per hour is higher than the equilibrium wage rate of $7.00 per hour. Therefore, the quantity of apricot pickers employed will decrease.

Question 15

Which of the following is an example of a price floor?
A)a law passed in a city to lower apartment rents by setting the maximum price that can be charged for rent
B)an equilibrium price
C)a minimum wage law
D)a law setting the highest price that can legally be charged for a gallon of gasoline.
E)None of the above answers give examples of a price floor.

Accepted Answer

A minimum wage law is an example of a price floor as it sets a minimum amount that must be paid for labor. This means that employers cannot pay their workers below this amount, creating a price floor for wages. A price floor sets a minimum price that cannot be legally changed lower. The other choices are not examples of a price floor as they either represent a market equilibrium or a maximum legal price that cannot be surpassed.

Question 16

$$\begin{array} { c c c } 
\begin{array} { c } 
\text { Wage rate } \
\text { (dollars per hour) }
\end{array} & \begin{array} { c } 
\text { Quantity demanded } \
\text { (workers) }
\end{array} & \begin{array} { c } 
\text { Quantity supplied } \
\text { (workers) }
\end{array} \
\hline 12 & 400 & 1000 \
11 & 600 & 900 \
10 & 800 & 800 \
9 & 1000 & 700 \
8 & 1200 & 500 \
\hline
\end{array}$$
-The labor demand and labor supply schedules are given in the table above. If a minimum wage of $11 per hour is imposed,
A)a surplus of 300 workers occurs.
B)there is no shortage or surplus of workers.
C)900 workers are employed.
D)Both answers B and C are correct.
E)Both answers A and C are correct.

Accepted Answer

The answer of \[\begin{array} { c c c } 
\begin{array}...

Question 17

A price floor
A)changes the equilibrium price if it is imposed in black markets.
B)changes the price and quantity if it is set below the equilibrium price.
C)changes the price and quantity if it is set above the equilibrium price.
D)does not create a black market if it is set above the equilibrium price.
E)changes the price and quantity only if it equals the equilibrium price.

Accepted Answer

A price floor is a government-imposed minimum price that is set above the equilibrium price. This creates a surplus of the good, as the quantity supplied exceeds the quantity demanded at the higher price. As a result, producers are left with unsold goods, and some may exit the market. The surplus can also lead to a decrease in quality as producers try to cut costs to maintain profitability. This is why price floors are typically used to support certain industries or groups, such as farmers, rather than being applied more widely.

Question 18

In the labor market, as wages rise, households
A)decrease the quantity of labor supplied.
B)increase the quantity of labor supplied.
C)decrease the quantity of labor demanded.
D)increase the quantity of labor demanded.
E)increase the supply of labor.

Accepted Answer

The answer of In the labor market, as wages rise,...

Question 19

-The figure above shows the labor market in a region. If a minimum wage of $8 an hour is imposed, then there are ________ unemployed workers.
A)20,000
B)40,000
C)60,000
D)80,000
E)zero

Accepted Answer

The answer of 
-The figure above shows the labor market...

Question 20

$$\begin{array} { c c c } 
\begin{array} { c } 
\text { Wage rate } \
\text { (dollars per hour) }
\end{array} & \begin{array} { c } 
\text { Quantity demanded } \
\text { (workers) }
\end{array} & \begin{array} { c } 
\text { Quantity supplied } \
\text { (workers) }
\end{array} \
\hline 12 & 400 & 1000 \
11 & 600 & 900 \
10 & 800 & 800 \
9 & 1000 & 700 \
8 & 1200 & 500 \
\hline
\end{array}$$
-The labor demand and labor supply schedules are given in the table above. If a minimum wage of $9 per hour is imposed,
A)a surplus of 300 workers occurs.
B)a shortage of 300 workers occurs.
C)there is no surplus or shortage of workers.
D)the quantity demanded is 1,000 workers.
E)there is unemployment of 700 workers.

Accepted Answer

The answer of \[\begin{array} { c c c } 
\begin{array}...

Quiz 7: Government Actions in Markets

Suppose the current equilibrium wage rate for housekeepers is $8.60 per hour. An increase in the minimum wage to $7.50 per hour leads to

A minimum wage law in a competitive labor market

A stated goal of a minimum wage is to

A minimum wage increases unemployment by

Suppose the equilibrium wage rate for apricot pickers is $9.00 per hour in California and at that wage rate the equilibrium quantity of apricot pickers is 14,000. If the minimum wage is set at $7.50 per hour, then

A price floor is

Suppose the current equilibrium wage rate for landscapers is $6.65 in Little Rock; $7.50 in St. Louis and $9.05 in Raleigh. An increase in the minimum wage to $7.50 per hour results in unemployment of landscapers in

Suppose the equilibrium price of a gallon of milk is $4. If the government imposes a price floor of $5 per gallon of milk, the

A price floor set above the equilibrium price

-The figure above shows the labor market in a region. If a minimum wage of $8 an hour is imposed, then the quantity of labor supplied is and the quantity of labor demanded is .

Why do some workers lose their job when a minimum wage level is increased?

A price floor makes prices

-The figure above shows the labor market in a region. For a minimum wage to change the wage rate and amount of employment, it must be

Suppose the equilibrium wage rate for apricot pickers is $7.00 per hour and at that wage rate the equilibrium quantity of apricot pickers employed is 14,000. If the minimum wage is set at $7.50 per hour, then the

Which of the following is an example of a price floor?

A price floor

In the labor market, as wages rise, households

-The figure above shows the labor market in a region. If a minimum wage of $8 an hour is imposed, then there are ________ unemployed workers.