Question 1

What is the wage rate paid to the laborer in Question 2 above?

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Question 2

How many laborers will be hired if the product and labor markets are both imperfect?

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Question 3

According to the textbook, proponents of minimum wage laws assume that:

Accepted Answer

Proponents of minimum wage laws assume that the demand for unskilled workers is nearly vertical, meaning that employers will continue to hire the same number of workers despite an increase in the minimum wage. This assumption allows proponents to argue that a minimum wage increase will benefit low-wage workers without causing significant job loss.

Question 4

The diagram above shows the labor market faced by monopsonists.To maximize profits, this firm will hire a labor at point:

Accepted Answer

A monopsonist maximizes profit by hiring labor where the marginal cost of labor (MCL) equals the marginal revenue product of labor (MRP). This typically occurs at a lower quantity of labor than in a competitive market, often represented by L1 in diagrams.

Question 5

How many laborers will be hired and what will the wage be if both product and labor markets are perfect and the going wage is $18 per worker? ______

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Question 6

The competitive labor market model suggests that persistence of significant employer discrimination

Accepted Answer

The competitive labor market model suggests that for significant employer discrimination to persist, it would require the owners of the firm to accept a lower rate of return on their capital than they could get elsewhere (below its opportunity cost). This is because discrimination incurs costs that reduce the firm's profitability.

Question 7

What is an important moral of this story?

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Question 8

What will the wage rate be for labor in Question 4 above?

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Question 9

Effective July 24, 2009, the federal minimum wage increased to $7.25 per hour (from $6.55). Use a diagram to illustrate the effect this increase would have on unskilled labor if
a. demand for labor is nearly vertical.
b. demand for labor is very elastic

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Question 10

How many will be employed if the labor market is perfect with a going wage of $18 and the product market is imperfect?

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Question 11

How many will be employed if the product market is perfect and the labor market is imperfect?

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