As mentioned in Lesson 3 of the textbook, minimum wage laws are an example of a price floor. Read the following articles and answer the following questions. Each question should be answered in one well written paragraph of 50-200 words (so you will write 4 paragraphs total). You may need to do a little additional research. Papers will be checked for plagiarism so write answers in your own words. Answer every question asked and follow directions to receive maximum points.
Submit your answer as a WORD or PDF document here in eCampus (click “attach files”). FAILURE TO FOLLOW DIRECTIONS WILL RESULT IN POINTS TAKEN OFF OR WORK NOT ACCEPTED. (Google docs can easily be converted into pdf files – you can figure out how).
Articles to read:
A couple more articles if you’re interested:
- Basic economics tells us price floors will have what result on a market? Draw a market graph for labor showing this outcome (DO NOT COPY AND PASTE AN IMAGE FROM THE INTERNET). You can embed your image in the document, or simply submit it as a second file (eCampus will allow more than one file to be submitted for the assigment). Write a paragraph explaining this your graph/this result. Remember – in a labor market, the workers supply labor, businesses demand our labor, and the price of labor is called a wage. Quantity supplied and quantity demanded at the price control should be labeled. (50 points)
- Landmark research by Card and Krueger showed that increases in the minimum wage do not necessarily have the expected effect (the outcome written about in Question 1). What was the expected outcome and what did Card and Kruger find in their study of fast food restaurants? Explain the “natural experiment” that allowed them to see the effect of an increase in the minimum wage. What are some reasons why the real world outcome didn’t match what economists were expecting with regard to employment? (20 points)
- The federal minimum wage has been $7.25 since 2009. Given that we generally have inflation, what does this mean for workers who earn the minimum wage? Explain. (10 points)
- Briefly explain monopsony. In the labor market, who might have monopsony power? How can monopsony power affects wages? Why is monopsony power generally something we seek to avoid in markets? (20 points)
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