25) An increase in the minimum wage to $15 per hour would lead to
A) an increase in search activity for many workers.
B) a decrease in search activity for many workers.
C) a decrease in unemployment.
D) no change in unemployment.
E) no change in employment.
26) Suppose the marginal benefit the owner of a cherry orchard derives from hiring Lauren to
pick cherries is $8 per hour. If the wage rate that Lauren earns is $7 per hour, then the orchard
owner’s surplus from Lauren’s labor is ________ per hour.
A) $7
B) $15
C) $1
D) $8
E) $0
27) The surplus for workers from a job is equal to the
A) marginal cost of work.
B) wage rate.
C) marginal cost of work minus the wage rate.
D) wage rate minus the marginal cost of work.
E) marginal benefit of hiring a worker minus the wage rate.
28) An efficient allocation of labor occurs when the
A) marginal benefit to workers exceeds the marginal benefit to firms.
B) marginal benefit to firms exceeds the marginal benefit to workers.
C) marginal cost to workers is equal to the marginal benefit to firms.
D) marginal cost and marginal benefit of both workers and the firms are equal to zero.
E) marginal benefit of workers exceeds the marginal cost to firms by as much as possible.
29) If the minimum wage is set above the equilibrium wage, after taking into account the
resources lost in job search, the firms’ surplus ________ and the workers’ surplus ________.
A) increases; increases
B) increases; decreases.
C) decreases; increases
D) decreases; decreases
E) does not change; decreases
30) A minimum wage set above the equilibrium wage
A) decreases the deadweight loss in the market.
B) decreases the workers’ surplus because workers must spend resources looking for jobs.
C) increases the firm’s surplus.
D) increases the market’s efficiency.
E) has no effect on the market.
31) A minimum wage that is above the equilibrium wage rate
A) increases efficiency within the labor market.
B) increases the quantity of labor demanded.
C) creates a deadweight loss.
D) has no effect on the labor market because it is set above the equilibrium wage rate.
E) None of the above answers is correct.
32) The deadweight loss associated with a minimum wage occurs because
A) the minimum wage increases the quantity of labor demanded.
B) the minimum wage decreases the quantity of labor supplied.
C) the minimum wage falls below the equilibrium wage.
D) employment after the minimum wage is less than employment at equilibrium and so the
marginal benefit of more work exceeds the marginal cost.
E) the minimum wage creates a shortage of labor because firms hire fewer workers.
33) A minimum wage
A) increases all workers’ surplus because the wage rate increases.
B) increases consumer surplus because the price of the good decreases.
C) decreases the firms’ surplus because fewer workers are hired at the higher wage.
D) increases the firms’ surplus and the workers’ surplus because it increases the efficiency of the
labor market.
E) None of the above answers is correct.
34) Who loses and who gains from the minimum wage?
A) Losers are all workers and gainers are all firms.
B) Losers are all firms and gainers are all workers.
C) Losers are all firms and some workers, while gainers are other workers.
D) Gainers are some firms and all workers, while losers are some firms.
E) Gainers are some firms and some workers, while losers are other firms and other workers.
35) The people who immediately benefit from a minimum wage are
A) employers who now pay the minimum wage.
B) those people who enter the labor force to search for minimum wage jobs.
C) the workers who retain their jobs after enactment of the minimum wage.
D) everyone, both demanders and suppliers, because the minimum wage benefits everyone.
E) all workers.
36) In the figure above, if the wage rate is $6 per hour, then the
A) firms’ surplus is the area d + e + f.
B) workers’ surplus is the area a + b + c.
C) deadweight loss equals zero.
D) Only answers A and C are correct.
E) Answers A, B, and C are correct.
37) In the figure above, if the minimum wage rate is $8 per hour, then after taking account of
resources lost in job search, the workers’ surplus is the area ________ and the firms’ surplus is
the area ________.
A) e; c
B) d; b
C) a; f
D) f; a
E) a + b + c + d + e; f
38) In the figure above, if the minimum wage is $8 per hour, then
A) resources used in job-search activity increase compared to the situation before the minimum
wage.
B) it is legal to hire workers for a wage below the minimum wage because otherwise
unemployment would result.
C) the deadweight loss is minimized.
D) Both answers A and B are correct.
E) Both answers B and C are correct.
39) The above figure shows a labor market with a minimum wage of $8 an hour. How many
people are employed when the minimum wage is in place?
A) 40,000
B) 60,000
C) 80,000
D) fewer than 40,000
E) more than 80,000
40) The above figure shows a labor market. Before the minimum wage of $8 an hour is imposed,
employment equals ________ workers; after the minimum wage of $8 an hour is imposed,
employment equals ________ workers.
A) 80,000; 40,000
B) 40,000; 80,000
C) 60,000; 40,000
D) 60,000; 80,000
E) 80,000; 60,000
41) The above figure shows a labor market with a minimum wage of $8 an hour. The value of
the resources workers are willing to use in their job search equals the distance between point
________ and point ________.
A) a; d
B) a; b
C) b; c
D) a; c
E) c; d
42) The above figure shows a labor market with a minimum wage of $8 an hour. The deadweight
loss equals the
A) area abc.
B) distance ab.
C) distance ad.
D) area bad.
E) area acd.
43) The above figure shows the market for finish carpenters in Bozeman. If there is a minimum
wage set at $18, then there will be
A) unemployment of 200 workers.
B) a surplus of 200 workers.
C) unemployment of 400 workers.
D) a surplus of 400 workers.
E) no unemployment of workers and no surplus of workers.
44) The above figure shows the market for finish carpenters in Bozeman. If there is a minimum
wage set at $18, what is true?
A) The lowest wage for which someone is willing to work is $18 an hour.
B) The quantity of jobs increases to 400.
C) The lowest wage for which someone is willing to work is $20 an hour.
D) 200 workers are employed.
E) The quantity of jobs demanded is more than the quantity supplied.
45) The above figure shows the market for finish carpenters in Bozeman. If there is a minimum
wage set at $18, which of the following statements is true?
A) Firms’ surplus increase with the minimum wage.
B) Workers who retain their jobs have their wages rise.
C) The market is efficient.
D) The quantity supplied of workers is less that quantity demanded.
E) Unemployment decreases because firms employ their workers more carefully.
46) The above figure shows the market for finish carpenters in Bozeman. There is a minimum
wage set at $18. Compared to the initial equilibrium without the minimum wage, once the
minimum wage is in place and after taking account of job search, the total workers’ surplus
________ and the total firms’ surplus ________.
A) decreases; increases
B) increases; increases
C) increases; decreases
D) does not change; increases
E) decreases; decreases
47) The above figure shows a labor market with minimum wage equal to $16. In this figure,
what area equals the firms’ surplus?
A) area A
B) area B
C) area C
D) area D
E) area E
48) The above figure shows a labor market with minimum wage equal to $16. In this figure,
after taking account of search costs, what area equals the workers’ surplus?
A) area A
B) area B
C) area C
D) area D
E) area E
49) The above figure shows a labor market with minimum wage equal to $16. In this figure,
what area equals the deadweight loss?
A) area A
B) area B
C) area C
D) area D
E) area E
50) The above figure shows a labor market with minimum wage equal to $16. In this figure,
what area equals the resources lost because of job search?
A) area A
B) area B
C) area C
D) area D
E) area E
51) The above figure shows the market for biologists. The government decides to set a
minimum wage for biologists of $18 per hour. After this minimum wage is in effect, the firms’
surplus equals ________.
A) $800
B) $900
C) $1,800
D) $400
E) $200
52) The above figure shows the market for biologists. The government decides to set a
minimum wage for biologists of $18 per hour. After this minimum wage is in effect, and taking
account of the resources lost in job search, workers’ surplus equals ________.
A) $800
B) $900
C) $400
D) $1,800
E) $200
53) The above figure shows the market for biologists. The government decides to set a
minimum wage for biologists of $18 per hour. After this minimum wage is in effect, the
deadweight loss equals ________.
A) $400
B) $200
C) $800
D) $1600
E) $100
54) The above figure shows the market for biologists. The government decides to set a minimum
wage for biologists of $18 per hour. After this minimum wage is in effect, unemployment equals
________ workers .
A) 100
B) 300
C) 400
D) 500
E) 200
55) A price floor is considered
A) “fair” based only on the fair results view.
B) “fair” based only on the fair rules view.
C) “unfair” based on both the fair results and fair rules views.
D) “unfair” based only on the fair results view.
E) “fair” based on the fair results view and on the fair rules view.
56) Is the minimum wage fair?
A) Yes, because all workers benefit because they are paid more.
B) No, because it enhances the prospects of voluntary exchange.
C) No, because workers who lose their jobs are made worse off.
D) Yes, because firms must pay a wage closer to a living wage.
E) Yes, because workers need the extra income.
57) One of the reasons a minimum wage is unfair is because it
A) benefits all workers.
B) blocks voluntary exchange.
C) is imposed by government.
D) is below the equilibrium wage rate.
E) cannot be enforced.
58) A minimum wage law set above the equilibrium wage rate is unfair because the minimum
wage
A) does not apply to all workers.
B) boosts the income of highly skilled workers.
C) benefits only those workers who are able to find and keep a job.
D) benefits nobody.
E) cannot be enforced.
59) Labor unions ________ increases in the minimum wage because an increase in the minimum
wage ________ the demand for union labor.
A) support; increases
B) support; decreases
C) oppose; increases
D) oppose; decreases
E) support; has no effect on
60) Labor unions support the minimum wage because
A) the increased unemployment is good for labor.
B) the value associated with the deadweight loss goes to labor unions.
C) labor unions prefer to operate in black markets.
D) it puts upward pressure on all wages.
E) union members are usually paid the minimum wage.
61) A price floor
A) is the highest price at which it is legal to trade a particular good, service, or factor of
production.
B) is the lowest price at which it is legal to trade a particular good, service, or factor of
production.
C) is an illegal price to charge.
D) is the equilibrium price when the stock market crashes.
E) is the lowest price for which the quantity demanded equals the quantity supplied.
62) A price floor is a price
A) below which a seller cannot legally sell.
B) above which a seller cannot legally sell.
C) that creates a shortage of the good if it is set above the equilibrium price.
D) Both answers A and C are correct.
E) Both answers B and C are correct.
63) The graph shows the labor market for painters. The lower the wage rate, the ________ is the
quantity of painters that firms demand and the ________ is the quantity of painters that
households are willing to supply.
A) greater; smaller
B) greater; greater
C) smaller; greater
D) smaller; smaller
E) None of the above answers is correct because both the demand and supply curves will shift in
response to the change in the wage rate.
64) To be effective in raising people’s wages, a minimum wage must be set
A) above the equilibrium wage rate.
B) below the equilibrium wage rate.
C) equal to the equilibrium wage rate.
D) below $7.
E) either above or below the equilibrium wage depending on whether the supply curve of labor
shifts rightward or leftward in response to the minimum wage.
65) A minimum wage set above the equilibrium wage rate
A) increases the quantity of labor services supplied.
B) decreases the quantity of labor services supplied.
C) has no effect on the quantity of labor services supplied.
D) shifts the labor supply curve rightward.
E) shifts the labor supply curve leftward.
66) A minimum wage set above the equilibrium wage will ________ the quantity of labor
demanded and ________ the quantity of labor supplied.
A) increase; increase
B) increase; decrease
C) decrease; increase
D) decrease; decrease
E) not change; not change
67) Suppose the current equilibrium wage rate for lifeguards in Houston is $7.85 an hour. A
minimum wage law that creates a price floor of $8.50 an hour leads to
A) a surplus of lifeguards in Houston.
B) a shortage of lifeguards in Houston.
C) no changes in the lifeguard market.
D) a change in the quantity of lifeguards supplied but no change in the quantity of lifeguards
demanded.
E) an increase in the number of lifeguards employed.
68) The graph shows the labor market for teenagers in Atlanta. If the government sets a
minimum wage of $6 an hour, the number of teenagers employed is ________.
A) 7,000
B) 5,000
C) 4,000
D) 3,000
E) less than 3,000
69) If the minimum wage is above the equilibrium wage rate, then an increase in the minimum
wage ________ employment and ________ unemployment.
A) increases; increases
B) increases; decreases
C) decreases; increases
D) decreases; decreases
E) does not change; increases
70) The graph shows the labor market for apple pickers in Ohio. If the government sets a
minimum wage of $5 an hour, ________ apple pickers are unemployed.
A) 6,000
B) 8,000
C) 10,000
D) 14,000
E) more than 14,000