The Affordable Care Act (also known as “Obamacare”) essentially mandates that every American have health insurance....

The Affordable Care Act (also known as “Obamacare”) essentially mandates that every American have health insurance. This question asks you to analyze the labor market effects of that law. (6 points total)

a. Suppose the government requires that firms offer health insurance to all of their workers, which increases the cost of hiring each worker by $h. Draw a graph that illustrates how this mandate influences the supply and demand for labor (label it explicitly, including axes). Assume that all workers feel that health insurance is worth $h. Be specific about how the supply and/or demand curves shift. Are workers better off, worse off, or the same as before? How about employers? (4 points)

b. If all workers value health insurance at $2h rather than $h, how do the supply and/or demand curves shift (you can either describe or graph the shifts)? Are workers better off, worse off, or the same as before? How about employers? (2 points)

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Expert Solution

Rahul Sunny answered 1 year ago

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