6.2.2Practice: Investigate Labor Markets

Use the information below to answer questions 1 through 3.

Jack's Convenience Store is open for 20 hours a day, Monday through Saturday. There is always one employee in the store. The store employs three full-time employees, who work 40 hours per week and earn $9 per hour. The store also spends $200 per week on each full-time employee's benefits. Their labor contract requires that they earn double-time for any overtime work and that any employee who works 30 hours or more per week be given full benefits. The store is considering expanding its hours to 24 hours per day, Monday through Saturday, and 16 hours on Sunday.

How much would it cost the store to expand its hours and have its current employees work overtime to cover the extra hours?

720

How much would it cost the store to expand its hours and hire a fourth full-time employee to cover the extra hours?

560

Which of these is the store's least-costly alternative?

Hire two new 20-hour-per-week employees at the current wage

Use the graph below to answer questions 4 through 6.
What would be the surplus of labor created by setting a $14 minimum wage?

4

Which of these would result from a minimum wage increase from $7 to $9?

One of these:

A.No change in qantity of labor demanded or the quantity of labor supplied
B.A decrease in the quantity of labor supplied and an increase in the quantity of labor demanded

Which of these would increase the market equilibrium wage above $10?

An increase in the demand for labor

What is the total cost of employing four laborers?

44

What is the marginal cost of adding a fifth laborer?

16

What is the profit-maximizing number of laborers?

6

Which of these would lead to an increase in the demand for skilled union laborers?

An increase in the minimum wage