Who are minimum wages designed to help? Do they succeed? What is their effect on society?
What will be an ideal response?
Minimum wages are designed to improve the incomes of low-wage earners. They do successfully raise the wages of those fortunate enough to find jobs at the minimum wage; however they reduce the chance of finding a job by decreasing the quantity of labor demanded. The low-wage earners who cannot find a job with a minimum wage in place are harmed.
Minimum wages harm society because they create a deadweight loss. In addition to the deadweight loss, minimum wages also:
• increase the amount of time it takes to find a job (search activity).
• encourage illegal hiring at wages below the minimum wage rate.
• block voluntary exchange at the equilibrium wage.
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A) bring less cattle to market this year. B) bring more cattle to market this year. C) keep supply unchanged now and bring more cattle to market next year. D) keep supply unchanged now and bring less cattle to market next year. E) do none of the above.
In game theory, we usually assume that all players
A) act rationally. B) use the information available to them to decide on a best strategy. C) know about the payoffs of the other players. D) All of the above.