(Solution) - The following diagram shows the market for labour in a -(2025 Original AI-Free Solution)
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The following diagram shows the market for labour in a particular industry. It shows both the supply of labour (the average cost of labout) and the marginal cost of labour.
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b. Now suppose the government imposes a minimum wage equal to wmm > w*. Show what happens to wages and employment.
c. In the absence of a minimum wage, show the outcome if there is a monopsony buyer of labour services. Call this wage wp.
d. Beginning with the monopsony outcome, show what happens if the government imposes a minimum wage above u/but lower than w*.
e. Do minimum wages always reduce employment? Explain.