The figure above illustrates the current market for fast-food workers in Baltimore
a. Without any government intervention, what is the equilibrium wage rate and amount of employment?
b. If the city government imposes a minimum wage of $3 an hour, what is the amount of employment? Does the minimum wage create any unemployment? Why or why not?
c. If the city government imposes a minimum wage of $6 an hour, what is the amount of employment? Does the minimum wage create any unemployment? Why or why not?
a. The equilibrium wage rate is $4 an hour and the equilibrium amount of employment is 8,000 workers.
b. Employment remains 8,000 workers. The minimum wage does not create any unemployment. The $3 per hour minimum wage does not bring about any unemployment because it is below the equilibrium wage rate.
c. Employment decreases to 4,000 workers, the quantity of labor demanded at a wage rate of $6 per hour. At the wage rate of $6 per hour, the quantity of labor supplied is 12,000 workers and the quantity of labor demanded is 4,000 workers. Hence there are 8,000 workers unemployed. The minimum wage of $6 an hour creates unemployment because it is higher than the equilibrium wage rate. As a result, the quantity of labor supplied increases and the quantity of labor demanded decreases, leading to a situation of excess supply, or unemployment.
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Given the information in the figure above, Joe can benefit from trade as far as the price at which he buys Liz's smoothies is
A) below 5 salads per smoothie. B) not higher than 2 salads per smoothie. C) not lower than 2 salads per smoothie. D) not lower than 1 salad per smoothie. E) not higher than 4 salads per smoothie.
Suppose the current exchange rate between the Chinese yuan and the United States dollar is 7 yuan per dollar. If the Fed sought to drive up the exchange rate to 8 yuan per dollar then it would
A) buy dollars. B) sell dollars. C) buy yuan. D) sell dollars and buy yuan.