Question

1. Suppose the equilibrium wage for unskilled workers in New Jersey is $7 per hour. How will the wages and employment of unskilled workers in New Jersey change if the state legislature raises the minimum wage from $5.15 per hour to $6 per hour?

Answer 1

Answer:

Consider the following explanation.

Explanation:

Marginal product MP is the increase in production of good because of unit increase in labor. Value of marginal product VMP is the increase in value of production of goods because of unit increase in labor.

The minimum wage is a regulation where the person who hired the labor needs to pay minimum wage and cannot pay below that. Here, the minimum wage is below the competitive market rate so it will not make any difference because the workers are already getting $7 as wage which is more than the minimum wage which is $6.