The following graph shows the labor market in the fast-food industry in the fict

Question

The following graph shows the labor market in the fast-food industry in the fictional town of Supersize City. Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph.

In this market, the equilibrium hourly wage is ___, and the equilibrium quantity of labor is ___ thousand workers.

Suppose a senator introduces a bill to legislate a minimum hourly wage of $6. This type of price control is called a quota/tax/price ceiling/price floor.

For each of the wages listed in the following table, determine the quantity of labor demanded, the quantity of labor supplied, and the direction of pressure exerted on wages in the absence of any price controls.

True or False: A minimum wage below $10 per hour is not a binding minimum wage in this market.

True

False

Wage Labor Demanded Labor Supplied Pressure on Wages (Dollars per hour) (Thousands of workers) (Thousands of workers) 12 Upward/Downward 8    Upward/Downward Graph Input Tool Market for Labor in the Fast Food Industry 18 16 5 14 Wage (Dollars per hour) 10 Supply Labor Demanded Thousands of workers) Labor Supplied (Thousands of workers) 8 450 CU 10 Demand 0 0 90 180 270 360 450 540 630 720 810 900 LABOR (Thousands of workers)

Explanation / Answer

The equilibrium hourly wage is $10 and quantity of labor is 450 thousands of workers

True. Since the minimum wage is less than equilibrium wage, labors would not agree to work for less and firms also would be willing to pay $10, hence it is not effective and binding.

Wage Ld Ls Pressure on wages 12 225 495 Downwards 8 675 405 Upwards

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