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Unformatted text preview: L 800 L 4. Suppose the supply and demand curves for unskilled labor in Nashville are shown in the figure below. a. Calculate worker and firm surplus. b. By how much will the imposition of a minimum wage at $12 per hour reduce total economic surplus? By how much will it increase worker surplus? By how much will it decrease firm surplus? c. Will total earnings be higher or lower after the imposition of the tax? d. How much would it cost the government each day to provide an earned- income tax credit under which workers as a group receive the same economic surplus as they do under the $12 per hour minimum wage? (Assume that the earned- income tax credit has no effect on labor supply.) e. Suppose employers are workers are risk- neutral, and Congress is about to enact a $12 per hour minimum wage. Congressional staff economists have urged legislators to instead consi...
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This note was uploaded on 02/13/2014 for the course ECON 2 taught by Professor Kim during the Winter '08 term at UCSD.

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