We know that the minimum wage causes unemployment. So, why does the government impose one?

What will be an ideal response?


The main reason for the minimum wage is because its supporters outnumber its opponents. Some supporters, such as labor unions, have a self-interested motivation for seeing a high minimum wage. A high minimum wage increases the cost of low-skilled labor, which is a substitute for high-skilled union labor. Hence firms decrease the quantity of low-skilled labor they demand and increase their demand for union labor, thereby increasing the employment and wages of union labor. Other supporters point to the fact that the minimum wage helps raise the incomes of low-skilled workers who retain jobs. Also, if the demand and supply of low-skilled workers is inelastic, the resulting unemployment will be low and so supporters might believe that helping some low-skilled workers is worth harming others.

Economics

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Opportunities for arbitrage in the foreign exchange markets throughout the world are:

A. plentiful, particularly in developing nations. B. plentiful, particularly in markets trading in U.S. dollars. C. fleeting, because technology today allows quick trading that eliminate them quickly. D. fleeting, because most governments ‘peg' or fix their currency's value to another's.

Economics

Which of the following gave the U.S. federal government the power to tax income?

A. The Full Employment and Balanced Growth Act of 1978. B. The capital gains tax of the Bush administration. C. The Sixteenth Amendment to the Constitution. D. The Social Security Act.

Economics

Which of the following statements is not true?

A. Periods of growth below the potential level are periods of high unemployment. B. Periods of growth above the potential level are periods of low employment. C. Periods of growth below the potential level are periods of low unemployment. D. The potential growth rate in the U.S. economy may have fallen following the financial crisis of 2007-2009.

Economics

If an industry's long-run supply curve slopes downward, then the industry is

A. an increasing-cost industry. B. a constant-cost industry. C. a decreasing-cost industry. D. a fixed-cost industry.

Economics