There are two separate labor markets in Toontown,illustrated by the graphs below.Both labor markets currently pay $6.00 per hour,and both require the same skills and qualifications.The Toontown City Council is considering enacting a $7.50 living wage ordinance,which would require all Toontown employers to pay wages of at least $7.50 per hour.
At the current wage of $6.00,worker surplus in Market A is ____ and in Market B is ___.

Question

There are two separate labor markets in Toontown,illustrated by the graphs below.Both labor markets currently pay $6.00 per hour,and both require the same skills and qualifications.The Toontown City Council is considering enacting a $7.50 living wage ordinance,which would require all Toontown employers to pay wages of at least $7.50 per hour. 
At the current wage of $6.00,worker surplus in Market A is ____ and in Market B is ___.

Quizplus · Accepted Answer

Worker surplus is the difference between the maximum amount a worker is willing to accept for a job and the actual wage paid. In both markets A and B, the demand for labor is equal to the supply of labor at the current wage of $6.00 per hour. Therefore, worker surplus is equal to half the area of the rectangle formed by the wage and the supply and demand curves.

For Market A, worker surplus is [(12-6)/2] x 6 = 18.

For Market B, worker surplus is [(15-6)/2] x 6 = 27. However, only half of the area (i.e., 27/2 = 13.5) is above the wage line, so worker surplus in Market B is actually 13.5 x 2 = 27.

If the living wage ordinance is enacted, both markets would be required to pay at least $7.50 per hour. This would cause a shortage of labor in Market A, as the quantity of labor supplied would now exceed the quantity demanded. However, in Market B, the quantity demanded would now exceed the quantity supplied, resulting in an increase in the wage rate and worker surplus.

There Are Two Separate Labor Markets in Toontown,illustrated by the Graphs