A. Minimum Wage in a Single Competitive Labor Market In a single competitive labor market, the...

A. Minimum Wage in a Single Competitive Labor Market In a single competitive labor market, the labor demand and labor supply curves are

LD = 200 − 20w

LS = 50 + 10w

where we measure labor in terms of workers per hour, and the hourly wage is measured in dollars per worker.

(a) Solve each equation for the wage w, and plot the resulting inverse labor demand and labor supply curves. Identify the market-clearing equilibrium.

(b) The government imposes an $8 hourly minimum wage on all employers. Illustrate this case. How many workers are employed in the minimum-wage equilibrium.

(c) How much (per hour) do workers lose or gain from the minimum wage? How much (per hour) do employer lose? Illustrate these amounts.

(d) How much is the efficiency loss from the minimum wage? Show this on your graph.

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Expert Solution

Rahul Sunny answered 1 year ago

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