Question 1

The value of the minimum wage has declined markedly since ______ and today its real value is approximately ______ what it was over half a century ago.
A) the 1950s;75 percent of
B) the 1950s;equal to
C) the mid-1970s;equal to
D) the 1980s;75 percent of
E) the 1980s;equal to

Accepted Answer

According to the statement, the decline in the value of the minimum wage happened since the mid-1970s. Therefore, options A and B are incorrect. Additionally, the statement mentions that today the real value of the minimum wage is "approximately equal to" what it was over half a century ago, eliminating options D and E. Therefore, the correct answer is C.

Question 2

Which of the following explains why increasing the minimum wage may fail to reduce income inequality or the poverty rate?
A) The Wessel's effect only applies to those workers with fringe benefits.
B) Employers may expect increased effort from workers after a minimum wage increase.
C) The majority of those affected by the minimum wage live in households with aggregate income far above the poverty line.
D) The minimum wage causes an increase in the out of poverty escape rate.
E) Earning the minimum wage cannot give the worker enough income to put him above the poverty line.

Accepted Answer

Studies have shown that the majority of workers who would benefit from a minimum wage increase do not live in households below the poverty line. In fact, many of these workers are second earners in households with relatively high aggregate incomes. Therefore, increasing the minimum wage may not effectively address income inequality or poverty.

Question 3

Which of the following is an accurate description of the Wessel's effect?
A) Working productivity is linearly related to educational attainment.
B) Firms may attempt to undo the effects of an increase in the minimum wage by reducing fringe benefits.
C) Hourly wages are equal to marginal productivity in a competitive environment.
D) The minimum wage will tend to increase employment in a monopsony environment.
E) Oligopoly conditions dampen the effect of a minimum wage.

Accepted Answer

Wessel's effect refers to the phenomenon where firms may respond to an increase in the minimum wage by reducing non-wage benefits to offset the increased labor costs.

Question 4

In a monopsony environment,an increase in the minimum wage ______ employment.
A) can increase or decrease
B) if the labor market is closed will increase
C) if the labor market is open will increase
D) will decrease
E) will not change

Accepted Answer

In a monopsony, the employer has significant control over the labor market. An increase in the minimum wage can lead to increased employment because it can force the employer to hire more workers at a higher wage, reducing the monopsonistic power and potentially increasing the quantity of labor demanded. However, in some cases, it might also lead to a decrease if the wage increase is too high, making it unprofitable for the employer to hire as many workers.

Question 5

When introduced in the United States,the minimum wage was set at ______ and covered about ______ of all workers.Today the federal minimum wage is ______ and it covers almost ______ of workers.
A) $0.25;50 percent;$4.25;50 percent
B) $1.00;75 percent;$10.25;50 percent
C) $0.50;100 percent;$7.25;90 percent
D) $0.50;75 percent;$7.25;90 percent
E) $0.25;50 percent;$5.25;90 percent

Accepted Answer

The answer of When introduced in the United States,the minimum...

Question 6

The minimum wage was introduced in the United States as part of the:
A) Fair Labor Standards Act of 1938.
B) Social Security Act of 1952.
C) Equal Pay Act of 1963.
D) Civil Rights Act of 1964.
E) Oaxaca decomposition.

Accepted Answer

The Fair Labor Standards Act of 1938 established the federal minimum wage in the United States.

Question 7

In the competitive model where all workers are covered by the minimum wage and all firms comply with the law,a minimum wage set above the competitive equilibrium wage will ______ employment and ______ unemployment.
A) increase;increase
B) not affect;decrease
C) decrease;increase
D) decrease;decrease
E) not affect;increase

Accepted Answer

Setting a minimum wage above the competitive equilibrium wage will increase the wage paid to workers, making it more expensive for firms to hire workers,resulting in a decrease in employment. As a result, some workers will lose their jobs or fail to find work, which will increase unemployment.

Question 8

In an economy with two distinct sectors,the imposition of a minimum wage above the competitive equilibrium wage in one of those sectors will:
A) reduce the demand for labor in the non-minimum-wage sector.
B) cause workers to move to the non-minimum-wage sector.
C) decrease the equilibrium wage in the minimum-wage sector.
D) increase unemployment in the non-minimum-wage sector.
E) decrease employment in the non-minimum-wage sector.

Accepted Answer

When a minimum wage is imposed above the equilibrium wage in one sector, it can lead to unemployment in that sector, causing workers to seek jobs in the non-minimum-wage sector.

Question 9

Today the federal minimum wage is and it covers almost of workers.
A) 4.25;50 percent
B) 10.25;50 percent
C) 7.25;90 percent
D) 5.25;90 percent
E) 8.00;75 percent

Accepted Answer

The answer of Today the federal minimum wage is and...

Question 10

Which of the following is NOT a reason that the real value of the minimum wage fluctuates considerably over time?
A) Sporadic changes to the nominal minimum wage.
B) Inconsistent enforcement of minimum wage legislation.
C) Inflation.
D) The political difficulty with which changes in the minimum wage occur.
E) Changes in prices over time.

Accepted Answer

Inconsistent enforcement of minimum wage legislation does not directly affect the real value of the minimum wage. The real value is influenced by changes in the nominal rate, inflation, political challenges in adjusting the rate, and overall price changes, but not by how consistently the law is enforced.

Question 11

Today,the federal minimum wage is set at $5.25,the minimum wage in California is set at $8.00,and the minimum wage in Ohio is $5.15.A worker covered by the minimum wage in California must be paid at least and a worker covered by the minimum wage in Ohio must be paid at least ______.
A) $8.00;$8.00
B) $8.00;$5.25
C) $8.00;$5.15
D) $5.25;$5.25
E) $5.25;$8.00

Accepted Answer

In the United States, when state and federal minimum wages differ, the higher wage prevails. Therefore, in California, where the state minimum wage is $8.00, which is higher than the federal minimum wage, workers must be paid at least $8.00. In Ohio, where the state minimum wage is $5.15, lower than the federal minimum wage of $5.25, the federal minimum wage prevails, so workers must be paid at least $5.25.

Question 12

The minimum wage was introduced in the United States as part of the ______ and excluded workers in the ______ sector.
A) Fair Labor Standards Act of 1938;agricultural.
B) Equal Pay Act of 1963;retail.
C) Fair Labor Standards Act of 1938;production
D) Equal Pay Act of 1963;retail
E) Equal Pay Act of 1963;agricultural

Accepted Answer

The minimum wage was introduced in the United States as part of the Fair Labor Standards Act of 1938, which excluded workers in the agricultural sector.

Question 13

In which type of market are all workers and firms price takers?
A) Oligopoly
B) Monopoly
C) Monopsony
D) Competitive
E) Monopolistic competition

Accepted Answer

In a competitive market, all workers and firms are price takers as no single firm or worker has the ability to influence the market price. The market price is determined solely by the interaction of market forces such as supply and demand. In an oligopoly, monopoly, or monopolistic competition, firms have some degree of market power which allows them to influence prices, while in a monopsony, a single buyer has market power over labor markets.

Question 14

Card,Katz,and Krueger's minimum wage findings have come under close scrutiny since their publication.Recent studies have found ______ that in the minimum wage can ______ employment.
A) an increase;increase
B) an increase;decrease
C) a decrease;increase
D) a decrease;decrease
E) no change;decrease

Accepted Answer

Recent studies have found that an increase in the minimum wage can decrease employment, which contradicts Card, Katz, and Krueger's findings.

Question 15

In an economy with two distinct sectors,the imposition of a minimum wage above the competitive equilibrium wage in one of those sectors will NOT:
A) reduce the demand for labor in the minimum-wage sector.
B) cause workers to move to the non-minimum-wage sector.
C) increase employment in the non-minimum-wage sector.
D) decrease employment in the minimum-wage sector.
E) increase unemployment in the non-minimum-wage sector.

Accepted Answer

Imposing a minimum wage above the competitive equilibrium in one sector typically does not increase unemployment in the other, non-minimum-wage sector. Instead, it might cause workers to move from the minimum-wage sector to the non-minimum-wage sector, potentially increasing unemployment in the minimum-wage sector and possibly increasing employment in the non-minimum-wage sector, depending on the demand for labor there.

Question 16

______ in the minimum wage could discourage schooling investments by making education ______ attractive relative to work.
A) An increase;more
B) An increase;less
C) A decrease;more
D) A decrease;less
E) There is no causal relationship between the minimum wage and education.

Accepted Answer

An increase in the minimum wage could make work more attractive relative to education by increasing the earnings of low-skilled workers, which could discourage them from investing in schooling. Conversely, a decrease in the minimum wage could make education more attractive relative to work, as low-skilled workers may be willing to sacrifice short-term earnings for the long-term benefits of education. Therefore, choice B is the best answer.

Question 17

In practice,the ______ of the minimum wage is usually ______.
A) coverage;incomplete
B) coverage;complete
C) enforcement;complete
D) effect;trivial
E) enforcement;trivial

Accepted Answer

The minimum wage law often does not cover all workers, resulting in incomplete coverage. Additionally, even when the law does cover a worker, enforcement can be challenging and not always successful, resulting in incomplete enforcement. Therefore, option A best describes the practical implementation of the minimum wage. The other options are not accurate, as the effect of the minimum wage can vary depending on various factors, and the level of enforcement can vary as well.

Question 18

Card,Katz,and Krueger published a series of influential papers in the 1990s that found that ______ in the minimum wage can ______ employment.
A) an increase;increase
B) an increase;decrease
C) a decrease;increase
D) a decrease;decrease
E) no change;decrease

Accepted Answer

Card, Katz, and Krueger's research in the 1990s challenged the traditional economic theory by showing that an increase in the minimum wage can lead to an increase in employment, contrary to what many had believed.

Quiz 8: Policy Application: the Minimum Wage

The value of the minimum wage has declined markedly since and today its real value is approximately what it was over half a century ago.

Which of the following explains why increasing the minimum wage may fail to reduce income inequality or the poverty rate?

Which of the following is an accurate description of the Wessel's effect?

In a monopsony environment,an increase in the minimum wage ______ employment.

When introduced in the United States,the minimum wage was set at and covered about of all workers.Today the federal minimum wage is and it covers almost of workers.

The minimum wage was introduced in the United States as part of the:

In the competitive model where all workers are covered by the minimum wage and all firms comply with the law,a minimum wage set above the competitive equilibrium wage will employment and unemployment.

In an economy with two distinct sectors,the imposition of a minimum wage above the competitive equilibrium wage in one of those sectors will:

Today the federal minimum wage is and it covers almost of workers.

Which of the following is NOT a reason that the real value of the minimum wage fluctuates considerably over time?

Today,the federal minimum wage is set at $5.25,the minimum wage in California is set at $8.00,and the minimum wage in Ohio is $5.15.A worker covered by the minimum wage in California must be paid at least and a worker covered by the minimum wage in Ohio must be paid at least ______.

The minimum wage was introduced in the United States as part of the and excluded workers in the sector.

In which type of market are all workers and firms price takers?

Card,Katz,and Krueger's minimum wage findings have come under close scrutiny since their publication.Recent studies have found that in the minimum wage can employment.

In an economy with two distinct sectors,the imposition of a minimum wage above the competitive equilibrium wage in one of those sectors will NOT:

in the minimum wage could discourage schooling investments by making education attractive relative to work.

In practice,the of the minimum wage is usually .

Card,Katz,and Krueger published a series of influential papers in the 1990s that found that in the minimum wage can employment.