PQUIZ8 - That is, the change in technology will likely lead...

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Econ 101: Principles of Microeconomics NAME: Korinna K. Hansen Disc. Section: Practice Quiz 8 Label all graphs: (4 points) The equilibrium wage in the unskilled labor market in the US was w 1 * , and the equilibrium quantity of unskilled workers L 1 * . Firm A employed l 1 * unskilled workers at w 1 * . Now, the government sets a minimum wage w min above the equilibrium wage (w 1 * ) in the unskilled labor market. At the new wage firm A employs l 2 *, and the US economy L 2 * unskilled workers. Use graphs to present this information. What is the main effect of the minimum wage? U n s k i l l e d L a b o r M a r k e t F i r m A (3 points) In the long run the increase in the cost of unskilled labor will lead firms to adopt more capital-intensive technology. In many cases, the capital acquired - even if complementary with
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Unformatted text preview: That is, the change in technology will likely lead to a decrease in the marginal product of unskilled labor. Use graphs to present this information. U n s k i l l e d L a b o r M a r k e t F i r m A (3 points) Capital-intensive technologies usually require skilled rather than unskilled labor to work with the new capital. Also the production of capital tends to employ skilled rather than unskilled labor. Thus an indirect impact of minimum wage legislation is to increase the marginal revenue product (MRP) of skilled labor in the long run, as firms shift to more capital-intensive technologies. Use graphs to present what is happening in the Skilled Labor Market. S k i l l e d L a b o r M a r k e t F i r m A...
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This note was uploaded on 11/27/2011 for the course ECONOMICS 101 taught by Professor Kelly during the Fall '10 term at Wisconsin.

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PQUIZ8 - That is, the change in technology will likely lead...

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