ECON 1 Chapter 49-52: : Minimum Wage, Price Floor, Price Ceiling

This paper evaluates the wage, employment, and hours effects of the first and second phase of the Seattle Minimum Wage Ordinance, which raised the minimum wage from $9.47 to $11 per hour in 2015 and to $13 per hour in 2016. Using a variety of methods to analyze employment in all sectors paying below a specified real hourly rate, we conclude that the second wage increase to $13 reduced hours worked in low-wage jobs by around 9 percent, while hourly wages in such jobs increased by around 3 percent. Consequently, total payroll fell for such jobs, implying that the minimum wage ordinance lowered low-wage employees' earnings by an average of $125 per month in 2016. Evidence attributes more modest effects on the first wage increase. We estimate an effect of zero when analyzing employment in the restaurant industry at all wage levels, comparable to many prior studies.

The increase in the minimum wage may cause workers to work more OR work less. Explain using the income and substitution effect why? (HINT: The price of the good is work, and the alternative good is leisure€, which is anything but work).

Workers choose, simply, to work, earn income, and consume, or leisure (i.e., not work). Explain how relative preferences for consumption or leisure can impact the work-no work decision after a minimum wage increase.

The article explains how, even with the minimum wage increase, employment has not fallen. Utilizing the substitution effect, explain how the firm may choose to minimize its costs increases elsewhere. Discuss 3 potential mechanisms instead of firing workers that an employer may use.

Question 1:

Economic discrimination puts the economy inside its production possibilities curve because discrimination:

Question 2:

Economic discrimination:

Question 3:

Labor market discrimination creates a:

Question 4:

An increase in the collective discrimination coefficients of employers will:

Question 5:

A reduction in the collective discrimination coefficients of employers will:

Question 6:

In the taste-for-discrimination model:

Question 7:

Which of the following employers is the most prejudiced? Employer:

Question 8:

An implication of the taste-for-discrimination model is that:

Question 9:

An employer is prejudiced, prefers to hire white rather than African-American workers, and is willing to pay higher wages to obtain white workers. This illustrates:

Question 10:

Empirical studies generally find that the estimated discrimination coefficient is larger in southern versus northern states. True or False: presuming that the wage differential is due to employer discrimination, this necessarily implies that there are more discriminating employers in the South than there are in the North.

1.Assume that there was a 10 per cent increase in the price of all goods in 2010; if the base year is 2009, then the price index in 2010 will be Select one:

a. 1100. b. 200. c. 90. d. 110.

2.The value of your money income, in terms of buying goods and services, is referred to like your money's

a. transaction cost.

b. rigidity factor.

c. staying power.

d. purchasing power.

3. Unemployment that is caused by business recessions is called

a. frictional unemployment.

b. seasonal unemployment.

c. structural unemployment.

d. cyclical unemployment.

4.All of the following are examples of a flow EXCEPT

a. the current unemployment rate.

b. a person who is fired from a job.

c. an individual who voluntarily leaves the labour force.

d. a new entrant into the labour force.

5.Which one of these factors plays a role in determining the extent and duration of frictional unemployment?

a. the ease with which job seekers can obtain information about job openings

b. the degree to which the overall level of business activity fluctuates up and down

c. the extent to which government legislation requires firms to provide health insurance for employees

d. the education and skill levels of labour force participants

6.Since 1950, the labour force participation rate in the United States

a. of men and women both decreased.

b. of men decreased and for women increased.

c. of men increased and women decreased.

d. of men and women both increased.

7.Increases in the duration of unemployment may

a. reflect a general downturn in economic activity that depresses job openings.

b. increase the unemployment rate.

c. All of these.

d. increase the number of discouraged workers.

8. A discouraged worker is someone who

a. is unemployed.

b. has been fired.

c. is not in the labour force.

d. is employed.

9.In the United States, the wage floor legislated by the government below which it is generally illegal to pay workers is known as

a. the going wage.

b. the employment gap.

c. the minimum wage.

d. the wage ceiling.

10. Which of the following is an effect of a minimum wage law that establishes a ceiling wage below the current market-clearing wage?

a. Surplus labour, or unemployment

b. A decrease in the market-clearing wage

c. A decrease in the quantity of labour supplied

d. An increase in the quantity of labour supplied

11. Which group of individuals most likely benefits from rent controls?

a. low-income wage earners who fail to obtain rental housing

b. the unemployed who fail to obtain rental housing

c. single-parent families without savings or other financial assets who fail to obtain rental housing

d. upper-income professionals who rent apartments at the price ceiling rate