Question 1

In a labor market characterized by a downward-sloping demand curve and an upward-rising supply curve,the disemployment effect of a minimum wage does not equal the total unemployment caused by the minimum wage.Which of the following can explain this difference?
A)The demand for unskilled labor increases with an increase in the wage rate
B)At a higher wage,more people may enter the job market
C)The demand for skilled labor increases with an increase in the wage rate
D)At a higher wage,the supply of labor becomes inelastic

Accepted Answer

When the minimum wage is increased, more people may enter the job market because the higher wage makes it more attractive to work. This increase in the supply of labor can offset some of the disemployment effects of the minimum wage, resulting in a smaller total unemployment caused by the policy.

Question 2

Employers sometimes reduce the fringe benefits provided to workers when the government sets a minimum wage in the labor market.Due to this:
A)the real wage that employers pay increases by more than the money wage.
B)the real wage that employers pay declines and is at times zero.
C)the real wage that employers pay increases at the same rate as the money wage.
D)the real wage that employers pay increases by less than the money wage.

Accepted Answer

When employers reduce fringe benefits in response to a minimum wage increase, the real wage that they pay increases by less than the money wage. This is because the reduction in fringe benefits offsets some of the increase in the money wage, resulting in a smaller increase in the real wage.

Question 3

The figure given below shows the demand and supply of unskilled labor that determines the equilibrium wage rate in the labor market.The minimum wage rate at $5.15 is higher than the equilibrium wage rate at $4. -Refer to Figure 18-1.Which of the following distances represents the complete unemployment created by the minimum wage legislation? A)OL₃ B)L₂L₃ C)L₂ L₁ D)OL₂

Accepted Answer

The distance between LS1 and U1 represents the amount of unemployment that would exist at the equilibrium wage rate of $4. However, the minimum wage rate of $5.15 creates a new equilibrium point at point B, resulting in complete unemployment represented by the distance between LS1 and U1 at point B (U1B13S1). This distance includes both the unemployment that would exist at the equilibrium wage rate and the additional unemployment created by the minimum wage legislation. Therefore, the correct choice is B.

Question 4

Consider two groups of workers both facing identical downward-sloping demand curves.The labor supply curve of group A workers is relatively elastic,while that of group B workers is relatively inelastic.Which of the following will result if the government imposes a minimum wage in both these labor market?
A)Group A workers will experience a higher disemployment effect than group B workers.
B)Group B workers will experience a higher disemployment effect than group A workers.
C)The total unemployment experienced by Group A workers will be higher than Group B workers.
D)The total unemployment experienced by Group B workers will be higher than Group A workers.

Accepted Answer

The answer of Consider two groups of workers both facing...

Question 5

The cost of the minimum wage is most likely borne by:
A)consumers who buy goods produced in the covered industry.
B)producers who produce goods in the covered industry.
C)producers in both the covered and uncovered industries.
D)consumers who have a perfectly elastic demand for goods produced by the covered industry.

Accepted Answer

The cost of the minimum wage is most likely borne by consumers who buy goods produced in the covered industry because the increased wages paid to workers are passed on to increased prices for goods and services produced in that industry. This is because firms cannot simply absorb the higher labor costs without affecting profits, so they shift some of the costs to consumers in the form of higher prices.

Question 6

A minimum wage mandated by the government will result in an increase in:
A)the supply of workers to the uncovered sector.
B)the wage rate in the uncovered sector.
C)employment opportunities in the covered sector.
D)the demand for workers in the covered sector.

Accepted Answer

The answer of A minimum wage mandated by the government...

Question 7

The disemployment effect of a minimum wage is greater the:
A)more elastic the supply curve of unskilled workers,for a given demand curve.
B)more inelastic the supply curve of unskilled workers,for a given demand curve.
C)the more inelastic the demand curve for unskilled workers,for a given supply curve.
D)the more elastic the demand curve for unskilled workers,for a given supply curve.

Accepted Answer

The disemployment effect of a minimum wage is greater when the demand for unskilled workers is more elastic, for a given supply curve. This means that if the demand for unskilled workers is sensitive to changes in the wage rate, then employers will hire fewer workers as the cost of labor increases due to the minimum wage. If the demand for unskilled workers is relatively inelastic, then employers are willing to pay a higher wage rate without significantly reducing their demand for workers.

Question 8

Suppose the current wage of Type A workers is $5 per labor hour,while that of Type B workers is $7 per labor hour.If the government sets the minimum wage in the labor market at $8 per labor hour,which of these two groups would experience a higher increase in the wage rate and by what percentage?
A)Type B workers;the wage rate would increase by 10 percent
B)Type A workers;the wage rate would increase by 10 percent
C)Type A workers;the wage rate would increase by 60 percent
D)Type B workers;the wage rate would increase by 60 percent

Accepted Answer

Type A workers' wage increases from $5 to $8, which is a $3 increase on a base of $5. This represents a 60% increase $(\frac{3}{5} = 0.6 \text{ or } 60\%$). Type B workers also see an increase, but their original wage is higher, so the percentage increase is less significant for them.

Question 9

Which of the following is not a consequence of the minimum wage law?
A)Reduced employment among low-skilled workers
B)Increased numbers of workers seeking jobs at the minimum wage
C)Higher incomes for some low-income workers
D)A large redistribution of income favoring low-income workers

Accepted Answer

The minimum wage law can result in reduced employment among low-skilled workers and increased numbers of workers seeking jobs at the minimum wage, as well as higher incomes for some low-income workers. However, it does not necessarily result in a large redistribution of income favoring low-income workers, as this would depend on the specific design and implementation of the minimum wage law, as well as other factors such as the overall economic climate and distributional effects of other policies.

Question 10

The figure given below shows the demand and supply of unskilled labor that determines the equilibrium wage rate in the labor market.The minimum wage rate at $5.15 is higher than the equilibrium wage rate at $4. -Refer to Figure 18-1.Which of the following distances represents the disemployment effect of the minimum wage? A)L₁L₃ B)L₂L₃ C)L₂ L₁ D)OL₂

Accepted Answer

The disemployment effect of the minimum wage is represented by the reduction in employment from the equilibrium level, which is the distance between L2 and L1.

Question 11

Minimum wage laws are promoted as the means of increasing the standard of living of the working poor.Which of the following is the most likely adverse consequence of minimum wage laws that makes the working poor worse off?
A)The least skilled workers are priced out of the labor market.
B)Firms respond by increasing other forms of non-wage compensation such as training and holiday pay.
C)The average price level declines,increasing the spending power of the people.
D)The skilled workers end up receiving a below average wage rate.

Accepted Answer

Minimum wage laws can result in employers hiring fewer workers and/or reducing hours to maintain profitability. This, in turn, may cause the least skilled workers to lose their jobs or find it harder to find employment. This adverse consequence makes the working poor worse off as it limits their employment opportunities, reduces their earning potential, and increases unemployment rates among them. Option B is incorrect as increasing non-wage compensation benefits the workers. Option C is incorrect as declining price levels may benefit consumers but not necessarily the working poor in terms of their employment opportunities and earning potential. Option D is not a likely consequence of minimum wage laws.

Question 12

The figure given below shows the demand and supply of unskilled labor that determines the equilibrium wage rate in the labor market.The minimum wage rate at $5.15 is higher than the equilibrium wage rate at $4. -Refer to Figure 18-1.The increase in the number of workers looking for work in this market due to the imposition of a $5.15 minimum wage is _____. A)L₁L₃ B)L₂L₃ C)OL₁ D)L₂L₁

Accepted Answer

The increase in the number of workers looking for work in this market due to the imposition of a $5.15 minimum wage is L1L3.

Question 13

Consider a labor market where the demand for labor is downward-sloping but the supply of labor is perfectly inelastic.Which of the following will hold true in this market when a minimum wage is imposed by the government?
A)The disemployment effect will surpass the total unemployment caused by the minimum wage.
B)The total unemployment will surpass the disemployment effect caused by the minimum wage.
C)The minimum wage will not decrease the total labor employment.
D)The disemployment effect will be equal to the total unemployment caused by the minimum wage.

Accepted Answer

The answer of Consider a labor market where the demand...

Question 14

The disemployment effect of the minimum wage refers to the tendency of employers to:
A)hire experienced workers at higher wages.
B)hire fewer workers at higher wages.
C)pay lower wages to skilled workers.
D)hire more workers at a lower wage.

Accepted Answer

The disemployment effect of the minimum wage refers to the tendency of employers to hire fewer workers at higher wages. When the minimum wage is increased, it becomes more expensive for employers to hire workers, which may lead them to reduce the amount of labor they demand. This can result in fewer job opportunities for low-skilled workers, who may be priced out of the labor market.

Question 15

The minimum wage law is not an effective instrument for fighting poverty because:
A)only skilled workers are covered under the minimum wage law.
B)many workers whose wages are affected by the law do not live in poor families.
C)only about half of employers comply with the law.
D)increases in the minimum wage cause large increases in unemployment.

Accepted Answer

The answer of The minimum wage law is not an...

Question 16

According to the Fair Labor Standards Act,which of the following workers are not covered under the minimum wage law?
A)Farm workers
B)Retailers
C)Skilled professionals
D)Engineers

Accepted Answer

The Fair Labor Standards Act specifically exempts farm workers from minimum wage requirements. Retailers, skilled professionals, and engineers are generally covered under the minimum wage law.

Question 17

Which of the following acts passed by the Congress in 1938 established a minimum wage for workers in the U.S.?
A)The Right to Employment Act
B)The Fair Labor Standards Act
C)The Employment Act
D)The American Jobs Act

Accepted Answer

The Fair Labor Standards Act (FLSA) of 1938 established a minimum wage, maximum workweek, and restrictions on child labor in the United States. The other acts listed did not establish a minimum wage.

Question 18

Which of the following categories of workers are directly affected by the minimum wage law?
A)Unskilled workers
B)Learned professionals
C)Businessmen
D)Part-time workers

Accepted Answer

The minimum wage law directly affects unskilled workers, or those who typically work in low-paying industries such as retail, fast food, and hospitality. Learned professionals and businessmen are generally not affected by minimum wage laws, and while part-time workers may be affected, it is not exclusively limited to them.

Question 19

Which of the following is most likely to occur after an increase in the minimum wage?
A)Low-skilled minority workers will face less discrimination in seeking employment.
B)The demand for skilled workers will fall.
C)Wages will rise in the sectors of the economy not covered by the law.
D)Employers will reduce the fringe benefits for workers who are covered by the law.

Accepted Answer

An increase in the minimum wage can lead employers to reduce non-wage benefits (such as health insurance, paid leave, etc.) to offset the higher wage costs. This is a common response as employers seek to manage their total compensation costs.

Question 20

The cost of the mandated minimum wage is most likely to be borne by the:
A)high income taxpayers who must pay the taxes to finance the program.
B)consumers who purchase the goods produced by unskilled workers.
C)businesses whose profits will fall due to the higher wage rates.
D)government which pays the difference between the equilibrium and the minimum wage.

Accepted Answer

The answer of The cost of the mandated minimum wage...

Quiz 18: Using Input Market Analysis

In a labor market characterized by a downward-sloping demand curve and an upward-rising supply curve,the disemployment effect of a minimum wage does not equal the total unemployment caused by the minimum wage.Which of the following can explain this difference?

Employers sometimes reduce the fringe benefits provided to workers when the government sets a minimum wage in the labor market.Due to this:

The cost of the minimum wage is most likely borne by:

A minimum wage mandated by the government will result in an increase in:

The disemployment effect of a minimum wage is greater the:

Suppose the current wage of Type A workers is $5 per labor hour,while that of Type B workers is $7 per labor hour.If the government sets the minimum wage in the labor market at $8 per labor hour,which of these two groups would experience a higher increase in the wage rate and by what percentage?

Which of the following is not a consequence of the minimum wage law?

Minimum wage laws are promoted as the means of increasing the standard of living of the working poor.Which of the following is the most likely adverse consequence of minimum wage laws that makes the working poor worse off?

Consider a labor market where the demand for labor is downward-sloping but the supply of labor is perfectly inelastic.Which of the following will hold true in this market when a minimum wage is imposed by the government?

The disemployment effect of the minimum wage refers to the tendency of employers to:

The minimum wage law is not an effective instrument for fighting poverty because:

According to the Fair Labor Standards Act,which of the following workers are not covered under the minimum wage law?

Which of the following acts passed by the Congress in 1938 established a minimum wage for workers in the U.S.?

Which of the following categories of workers are directly affected by the minimum wage law?

Which of the following is most likely to occur after an increase in the minimum wage?

The cost of the mandated minimum wage is most likely to be borne by the: