Question

1. Which of the following statements about the labor market is (are) correct?
(x) The supply curve reflects job seekers and the demand curve reflects the jobs that are available.
(y) Workers determine the demand for labor, and firms determine the supply of labor.
(z) The minimum wage is an example of a price floor because the government has mandated a minimum price of labor.
A. (x), (y) and (z) B. (x) and (y) only
C. (x) and (z) only D. (y) and (z) only
E. (x) only

2. Which of the following statements about the minimum wage and the unskilled labor market is (are) correct?
(x) If the government mandated minimum wage is above the equilibrium wage, then the minimum wage is a binding price floor and the quantity demanded of labor will be greater than the quantity supplied.
(y) If the minimum wage is less than the equilibrium wage, then anyone who wants a job at the minimum wage will find it difficult to get a job since the quantity supplied of labor exceeds the quantity demanded.
(z) Although the minimum wage is an example of a price floor, it is not a binding price floor if the equilibrium wage is more than the government mandated minimum wage.
A. (x), (y) and (z) B. (x) and (y) only
C. (x) and (z) only D. (y) and (z) only
E. (z) only

Which of the following statements is (are) correct?
(x) Unlike minimum wage laws, wage subsidies, such as the earned income tax credit, raise living standards of the working poor without creating unemployment.
(y) In general, advocates of the minimum wage believe that adverse effects are small, and generally a higher minimum wage makes the poor better off.
(z) Workers with high skills and much experience are not affected by the minimum wage because their equilibrium wages are well above the minimum wage.
A. (x), (y) and (z) B. (x) and (y) only
C. (x) and (z) only D. (y) and (z) only
E. (x) only

Answer 1

1. Which of the following statements about the labor market is (are) correct?
(x) The supply curve reflects job seekers and the demand curve reflects the jobs that are available.
(y) Workers determine the demand for labor, and firms determine the supply of labor.
(z) The minimum wage is an example of a price floor because the government has mandated a minimum price of labor.
A. (x), (y) and (z) B. (x) and (y) only
C. (x) and (z) only D. (y) and (z) only
E. (x) only

Correct answer is : C.

Statements x and z are correct. Demand for labor is a derived demand and is determined by industrial activity. Minimum wage is price floor as it sets minimum legal wage.

2. Which of the following statements about the minimum wage and the unskilled labor market is (are) correct?
(x) If the government mandated minimum wage is above the equilibrium wage, then the minimum wage is a binding price floor and the quantity demanded of labor will be greater than the quantity supplied.
(y) If the minimum wage is less than the equilibrium wage, then anyone who wants a job at the minimum wage will find it difficult to get a job since the quantity supplied of labor exceeds the quantity demanded.
(z) Although the minimum wage is an example of a price floor, it is not a binding price floor if the equilibrium wage is more than the government mandated minimum wage.
A. (x), (y) and (z) B. (x) and (y) only
C. (x) and (z) only D. (y) and (z) only
E. (z) only

Correct option is option E. Only Z is correct. Minimum wage will not be binding if market wage is more. Firms will continue to pay market wage as it leads to equal demand and supply of labor. X is wrong as any wage above market equilibrium wage will supply more labor and demand less. If minimum wage is less than market wage than supply will be less than demand.

Which of the following statements is (are) correct?
(x) Unlike minimum wage laws, wage subsidies, such as the earned income tax credit, raise living standards of the working poor without creating unemployment.
(y) In general, advocates of the minimum wage believe that adverse effects are small, and generally a higher minimum wage makes the poor better off.
(z) Workers with high skills and much experience are not affected by the minimum wage because their equilibrium wages are well above the minimum wage.
A. (x), (y) and (z) B. (x) and (y) only
C. (x) and (z) only D. (y) and (z) only
E. (x) only

Correct option is option: A. All are correct options.