Consider the accompanying figure representing the labor market below. If a minimum wage of $12 per hour is imposed in this labor market then worker surplus will ________ and employer surplus will ________.

Question

Consider the accompanying figure representing the labor market below.  If a minimum wage of $12 per hour is imposed in this labor market then worker surplus will ________ and employer surplus will ________.

Quizplus · Accepted Answer

Prior to the imposition of the minimum wage, worker surplus is ½ × 400 × $8 = $1,600, and after the imposition of the minimum wage worker surplus rises to (½ × 200 × $4)+ (200 × $8)= $2,000. Prior to the imposition of the minimum wage, employer surplus is ½ × 400 × $8 = $1,600, and after the imposition of the minimum wage, employer surplus falls to ½ × 200 × $4 = $400.

Consider the Accompanying Figure Representing the Labor Market Below