Use the following to answer questions :
Figure 12-1
-Suppose the government imposes a minimum wage of 5.What is the total wage paid to labor in Figure 12-1?

Question

Use the following to answer questions :
Figure 12-1 
-Suppose the government imposes a minimum wage of 5.What is the total wage paid to labor in Figure 12-1?

Quizplus · Accepted Answer

By imposing a minimum wage of 5, the wage rate for labor increases from 4 to 5. This means that the quantity demanded of labor decreases from 6 to 5 million workers, while the quantity supplied of labor increases from 4 to 5 million workers. The total wage paid to labor is equal to the wage rate multiplied by the quantity of labor employed. Therefore, the total wage paid to labor in Figure 12-1 is 5 (million workers) x 20 (billion dollars) = 100 (billion dollars). Answer choice C is the closest to this result, as it is 20 billion dollars.

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