2/11/2021 Solved: Suppose that Congress passes a law requiring employers ... | Chegg.

com

  Textbook Solutions Expert Q&A Practice Study Pack 

Find solutions for your homework

Chapter 28, Problem 9PA 2 Bookmarks Search
Show all steps: ON

home / study / business / business statistics / business statistics solutions manuals / principles of economics / 7th edition / chapter 28 / problem 9pa

Principles of Economics (7th Edition) Post a question

Answers from our experts for your tough
homework questions
See this solution in the app
Enter question

Problem Continue to post

20 questions remaining

Suppose that Congress passes a law requiring employers to provide employees some benefit
(such as healthcare) that raises the cost of an employee by $4 per hour.

a. What effect does this employer mandate have on the demand for labor? (In answering this and Snap a photo from your
the following questions, be quantitative when you can.) phone to post a question
We'll send you a one-time
b. If employees place a value on this benefit exactly equal to its cost, what effect does this download link
employer mandate have on the supply of labor?

c. If the wage can freely adjust to balance supply and demand, how does this law affect the wage 888-888-8888 Text me
and the level of employment? Are employers better or worse off? Are employees better or worse
off? By providing your phone number, you agree to rec
a one-time automated text message with a link to
the app. Standard messaging rates may apply.
d. Suppose that, before the mandate, the wage in this market was $3 above the minimum wage.
In this case, how does the employer mandate affect the wage, the level of employment, and the
level of unemployment?

e. Now suppose that workers do not value the mandated benefit at all. How does this alternative My Textbook Solutions
assumption change your answers to parts (b) and (c)?

Step-by-step solution
Principles of Introduction Corporate
Economics to... Finance...
7th Edition 2nd Edition 4th Edition
Step 1 of 5
View all solutions

a. The effect would be that the demand curve for the labor would shift to W1 – $4 if the company
is not willing to pay as high a wage given the increased cost of the benefits.
Stay ahead in class with practice exams
https://www.chegg.com/homework-help/suppose-congress-passes-law-requiring-employers-provide-empl-chapter-28-problem-9pa-solution-97813051… 1/3
2/11/2021 Solved: Suppose that Congress passes a law requiring employers ... | Chegg.com

Comment
  Textbook Solutions Expert Q&A Practice Study Pack 

Chapter 28, Problem 9PA Step 2 of 5 2 Bookmarks Show all steps: ON

b. If the employees place a value on this benefit exactly equal to its cost, which is $4, then the
effect would be that there would be a shift in the supply curve as the employees would be willing
to work for $4 less per hour.

Comment

Step 3 of 5

c. From the graph, we can observe that the market equilibrium is at points a and b. The effect
would be that the wage would be less by $(W1 – 4).

As there is no change in the Quantity of labor irrespective of the change in the wage, both the
employee and the employers are better off

Comment

Step 4 of 5

d. If the market wage is $3, before the mandate, then the wage could not be negative (W1 – $4)
because W1 is $3 here. Hence, it would lead to increase in unemployment.

Therefore, the unemployment would be LD-LS.

Comment

Step 5 of 5

e. If the workers do not value the mandated benefit at all, the supply curve of labor does not shift
down. As a result, the wage rate will decline by less than $4 and the equilibrium quantity of labor
will decline. Employers are worse off, because they now pay a greater total wage plus benefits
Stay ahead in class with practice exams
https://www.chegg.com/homework-help/suppose-congress-passes-law-requiring-employers-provide-empl-chapter-28-problem-9pa-solution-97813051… 2/3
2/11/2021 Solved: Suppose that Congress passes a law requiring employers ... | Chegg.com
for fewer workers. Employees are worse off, because they get a lower wage and fewer are
 
employed. Textbook Solutions Expert Q&A Practice Study Pack 

CommentChapter 28, Problem 9PA 2 Bookmarks Show all steps: ON

Was this solution helpful? 7 0

Recommended solutions for you in Chapter 28

Chapter 28, Problem 5QR Chapter 28, Problem 6QCM

How do unions affect the natural rate of According to the theory of efficiency wages,a. firms
unemployment? may find it profitable to pay above-equilibrium
wages.b. an excess supply...
See solution
See solution

See more problems in subjects you study

COMPANY

LEGAL & POLICIES

CHEGG PRODUCTS AND SERVICES

CHEGG NETWORK

CUSTOMER SERVICE

© 2003-2021 Chegg Inc. All rights reserved.

Stay ahead in class with practice exams

https://www.chegg.com/homework-help/suppose-congress-passes-law-requiring-employers-provide-empl-chapter-28-problem-9pa-solution-97813051… 3/3