--%>
Assignment Help - homework help

Question on level of free market wage rate and employment

In the year of 1996, the U.S. Congress raised the minimum wage from $4.25 per hour to $5.15 per hour. Some of the people suggested that a government subsidy could help employers finance the higher wage. Assume the supply of low-skilled labour is specified by

                                                                          LS= 10w

where LS is the quantity of low-skilled labour (in millions of persons employed each year) and w is the wage rate (in dollars per hour). The demand for labour is specified by
                                                             LD =80-10w

What will be the level of free market wage rate & employment? Assume the government sets a minimum wage of $5 per hour. How many people would be employed then?
In a free-market equilibrium, LS = LD. Solving out yields w = $4 and LS = LD = 40. If the minimum wage is $5, then LS = 50 and LD = 30. The number of people employed will be specified by the labour demand, thus employers will hire 30 million workers.

2011_ans 12.png

 

   Related Questions in Finance Basics

  • Q : Equilibrium price level and level of

    Normal 0 false false

  • Q : Summer Co. is expected to pay a

    Summer Co. is expected to pay a dividend or $4.00 per share out of earnings of $7.50 per share. If the required rate of return on the stock is 15% and dividends are growing at a current rate of 10% per year, calculate the present value of the growth opportunity for the stock (PVGO)

    		•
  • Q : Define the term year of Completion Year

    Year of Completion (YOC): This is the last fiscal year for which the appropriation is accessible for encumbrance or expenditure.

    		•
  • Q : Role of depreciation in estimating

    What kind of role does depreciation play in estimating incremental cash flows? Depreciation expense is a tax deductible expense and therefore affects cash flow through its effect on taxes. Depreciation expense which is incremental to a proposed

    		•
  • Q : Influence of opportunity costs How do

    How do opportunity costs influence the capital budgeting decision-making procedure? Opportunity costs reflect the foregone benefits of alternative not selected when a capital budgeting project is chosen. Any decrease in the cash flows of the fi

    		•
  • Q : Free-rider problem Normal 0 false false

    Normal 0 false false

    		•
  • Q : Reimbursement Warrant or Revenue

    Reimbursement Warrant (or Revenue Anticipation Warrant): A warrant which has been sold by the State Controller’s Office, as an outcome of a cash shortage in th

    		•
  • Q : Private closed economy based question

    Normal 0 false false

    		•
  • Q : Define Executive Order Executive Order

    Executive Order (EO): It is a budget document, issued by the Department of Finance, asking for the State Controller’s Office to make an adjustment in their accounts. The adjustments are usually authorized by the Budget Act provision language, Bu

    		•
  • Q : Financial crisis during 1997-1998

    Describe the Financial crisis during the time period of 1997-1998 ?

    		•