Log out Go to App
Go to App

Learning Materials

Features

Discover

Chapter 4: Q. e (page 89)

When firms respond to minimum wage increases by shutting down entirely, who else is harmed besides their employees?

Short Answer

Expert verified

Consumers

Step by step solution

01

Step1. Given information

Upon imposition of price floors to ensure a minimum wage, the companies shut down entirely.

02

Step2. Explanation

As the minimum wages increase the cost of production significantly, companies might be unable to operate and force to shut down. In such cases, not only the employees loose their complete livelihood, but also the consumers suffer as the supply in the market, and hence the choices to choose from for consumers fall as well.

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Start your free trial

Over 30 million students worldwide already upgrade their learning with Vaia!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

How might California cities alternatively have developed a rationing-by-queues approach using the internet?

How do you suppose that when soft drink sellers introduced cans containing 7.5 ounces of soft drink to sell alongside traditional 12-ounce cans, they managed to offer the soft drinks in the smaller cans at prices that were several cents higher per ounce of soft drink?

Consider the information in Problem 4-9 and your

answers to that question.Suppose that the market

clearing price of Pakistani wheat in the absence of

price supports is equal to$0.10 per kilogram.At

this price,the quantity of wheat demanded is 12

billion kilograms.Under the government wheat

price-support program,how much more is spent

each year on wheat harvested in Pakistan than oth

erwise would have been spent in an unregulated

market for Pakistani wheat?

The consequences of decriminalizing illegal drugs

have long been debated.Some claim that legal

ization will lower the price of these drugs and

reduce related crime and that more people will

use these drugs.Suppose some of these drugs are

legalized so that anyone may sell them and use

them.Now consider the two claims-that price

will fall and quantity demanded will increase.

Based on positive economic analysis,are these

claims sound?

Why do you think that economists seek to study prices measured in terms of dollars per unit as measured, say, by weight or by volume rather than by prices per package or per container? Explain your reasoning.
See all solutions

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.

Sign-up for free