c.4 problem sets

The City Pub is about to open its doors. The last step is to hire bartenders. If the labor market is in equilibrium, then based on the table below, what daily wage will the City Pub pay to its bartenders? $350 → demand:55 / supply:55

$350

Assume that the market equilibrium price is 50 cents for a pound of bananas, and the quantity sold is roughly 10 pounds. What kind of price control could generate an excess supply of bananas?

A price floor of 75 cents per pound

Which of the following descriptions explains how government subsidies on education and job training impact labor supply?

Government subsidies make training and education more attainable, increasing the supply of labor.

Suppose a government policy is put in place offering an additional six months of generous unemployment benefits for employees who are laid off. How would we expect this to impact the labor supply?

Labor supply decreases.

Consider the market for fast food workers that is currently in equilibrium. If the government institutes a minimum wage that is above the market wage, what will be the consequence?

There will be a surplus of workers.

True or false? An expanding company would be more likely to build a new headquarters in an area where most of the workforce has graduated college.

True

True or false? An increased level of required education decreases labor supply.

True

A minimum wage is a price floor on wages that must be set __________ the equilibrium wage in order for it to be binding or effective.

above

The graph below shows the market for labor (information technology (IT) professionals). As more businesses begin using bookkeeping software, the need for IT professionals who support the software increases. Demonstrate the effect this has on the demand for IT professionals.

demand increases (to the right)

True or false? Government subsidized child care for teachers decreases the supply of teachers.

false

True or false? In the market for fast-food workers a minimum wage exists that is above the market wage. If this minimum wage is removed, the wage of fast-food workers will increase.

false If a minimum wage is set above the market wage and is removed, the resulting wage will be at the equilibrium value, which is below the minimum wage.

All of the following decrease labor supply except________.

legally requiring employer paid health care.

Many local municipalities have mandated locally higher minimum wage than the federally mandated minimum wage. Such locally higher minimum wage is established around the idea that people should be able to purchase the essentials of life by working a forty hour work week and is called a(n) __________.

living wage

The minimum wage is an example of a(n) __________.

price floor

Technology can either shift the labor demand to the right or to the left, depending on its effect on the marginal product of labor. If we find that technology has shifted the labor demand to the left, this is a(n) ______________ to labor.

substitute

Of the following factors, all will always decrease labor demand except:

technology as a complement to labor

If a minimum wage (a price floor) for dentists is set below the prevailing market wage rate, then this will result in _____________ .

the free market equilibrium quantity of dentists

Theoretically, price controls are counterproductive in which of the following markets?

throughout the entire economy—in all markets and market types

True or false? A consequence of a minimum wage set above the equilibrium wage rate in the market for unskilled retail workers will be a surplus of unskilled retail workers.

true

True or false? In much of the United States, if a living wage were set as a price floor in the unskilled labor market by either the federal or local government, then it would be a binding price floor.

true A living wage is defined as a price floor that is designed to ensure that employees working full time make enough money to afford the essentials of life. A price floor set above the equilibrium is referred to as binding because it prevents the market from reaching the equilibrium. In most of the United States, a living wage would be a binding price floor, since a living wage is above the market equilibrium wage level.

True or false? Price controls can cause more harm than good because they do nothing to affect the underlying forces of demand and supply.

true Price controls do nothing to affect the underlying forces of demand and supply, and this can have serious repercussions. For example. during China's "Great Leap Forward" in the late 1950s, the government kept food prices artificially low, with the result that 30 to 40 million people died of starvation as the artificially low prices depressed farm production.

Suppose Springfield, Illinois implements a 5% increase in the minimum wage. What are some possible effects of this change?

• Some employees being given less work hours • An increase in income for some employees