E202Solutions9.2

E202Solutions9.2 - b. Suppose the Clothing Workers Union...

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b. Suppose the Clothing Workers Union now sets a weekly minimum acceptable wage of $230 per week. All the workers Stone hires belong to the union. How does the minimum wage affect Stone’s decision about how many workers to hire? Answer : Stone’s decision is not affected, since the equilibrium wage is higher than the minimum wage. c. If the minimum wage set by the union had been $400 per week, how would the minimum wage affect Stone’s decision about how many workers to hire? Answer : This time, the union wage is higher than the equilibrium wage. Stone will no longer hire the fourth worker. d. If Stone again faces a market wage of $250 per week but the price of jeans rises to $45, how many workers will the company now hire? Answer : The final column of the table now has VMPs of 1000, 800, 600, 480, 320, and 200. Stone will now hire a fifth worker. 6. Jones, who is currently unemployed, is a participant in three means-tested welfare programs: food stamps, rent stamps, and day care stamps. Each program grants him $150 per month in
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This note was uploaded on 02/20/2012 for the course ECON 202 taught by Professor Brightwell during the Spring '08 term at Texas A&M.

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