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E202Solutions9.2

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

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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 stamps, which can be used like cash to purchase the good or service they cover.
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