True, False, or Uncertain [6 marks] Explain why each of the following statements

Question

True, False, or Uncertain [6 marks]

Explain why each of the following statements is True,, False,, or Uncertain according to economic principles. Use diagrams where appropriate. Unsupported answers will receive no marks. It is the explanation that is important.

7. An incrase in the minimum wage will have no effect on either firm-level or industry level supply curves for competitive industries that hire minimum wage labour, so prices will be unaffected in these markets in both the short and long run. [Hint: assume the industry is composed of identical firms.]

Explanation / Answer

False.

The supply curve of labour in a competitive market would increase as more workers would enter the work force due to hike in minimum wage. The demand for labour would reduce as the cost of production increases. The prices would rise in the short run.

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