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Assignment: In 1938, the US Congress passed the Fair Labor Standards Act. The Act instituted a minimum wage of 25 cents per hour. Currently the Federal minimum wage is $7.25 per hour. Many contend that $7.25 per hour is below a “living wage.” While it is not likely Congress will increase the Federal minimum wage any time soon, many states have instituted higher minimum wages on their own, some as high as $15 per hour. Using your understanding of the nature of economic inquiry, address the following questions (you can refer to Chapter 11 in your textbook, particularly.

Date Posted: 13/04/2020
Category: Business
Due Date: 14/04/2020
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Assignment: In 1938, the US Congress passed the Fair Labor Standards Act. The Act instituted a minimum wage of 25 cents per hour. Currently the Federal minimum wage is $7.25 per hour. Many contend that $7.25 per hour is below a “living wage.” While it is not likely Congress will increase the Federal minimum wage any time soon, many states have instituted higher minimum wages on their own, some as high as $15 per hour. Using your understanding of the nature of economic inquiry, address the following questions (you can refer to Chapter 11 in your textbook, particularly the appendix): a. In the perfectly competitive model of the labor market, what are the effects of increasing the minimum wage? (Think about the effects of price floors from Chapter 4.) What are the effects if the labor market has some degree of monopsony power? b. Discuss the tradeoffs between increasing wages for some workers, while increasing the risk of unemployment for other workers. c. Taking everything into account, do you support the government increasing the minimum wage?
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