Consider the following supply and demand equations for labor in a given industry:
Supply of Labor: W = .25L
Demand for Labor: W = 12 - .25L
a. If a minimum wage of $8 is applied to this market, how many people will lose their jobs because of minimum wage? How many will be added to the unemployment rolls?
b. If the labor market given above is for a community in which monopsonistic labor market conditions apply, what will be the wage rate paid by the monopsonistic profit-maximizing firm before the minimum wage is applied? (Assume part-time employment is possible.) How many workers will be employed?
c. If a $5 minimum wage is now applied to the monopsonistic market described above, how many laborers will the firm employ? As a policy maker, would you support a minimum wage law?