Consider the markets for low-skilled and high-skilled labor.
a. Suppose the government introduces a subsidy to the employment
of low-skilled workers physically paid to firms. (For simplicity,
assume the government pays firms some amount for each low-skilled
worker they hire.) How will the subsidy affect the employment of
low-skilled workers, the wage low-skilled workers receive, and the
netof-subsidy wage for low-skilled workers paid by firms? Will this
policy tend to increase, decrease, or have no effect on income
inequality (or...