the long-run. A3-7. An increase in the minimum wage will have no effect on eithe
ID: 1110105 • Letter: T
Question
the long-run. A3-7. An increase in the minimum wage will have no effect on either firm-level or industry level supply curves for competitive industries that hire minimum wage labour, so prices will be unaffected in these markets in both the short and long run. [Hint: Assume the industry is composed of identical firms.] A3-8. A cartel composed of small firms who would otherwise be operating in a competitive market is stable because the firms have no incentive to increase output beyond their agreed-upon output quota.
Explanation / Answer
A3-7 False
Because of minimum wage the supply of labour will increase and demand will fall thus due to excessive supply wages will fall.As wages are determinant of cost and thus cost will automatically change and subsequently prices charged.
A3-8 True
Because small firms are capacity constraint couldn't supply to the whole industry even if it break away from cartel Charing lower prices. So it is better for first to stick to cartel and produce the allocated quota.
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