Question

Suppose that Figure 4-5 applies to the labor market in

the state of Ohio,in whichW,is the minimum wage

established by the federal government,andQ,-Qa

therefore is Ohio's excess quantity of labor supplied as

aresult of the federal wage minimum.What would

happen to Ohio's excess quantity of labor supplied if

the state were to decide to establish its own minimum

wage atalevel above the federal minimum?

Short answer

Increase.

Step-by-step solution

Step1. Given information

The state is to impose a new wage minimum, above the federal minimum.

Step2. Explanation

There exist an excess supply of labor at the federal wage minimum as not many firms are willing to demand at the given high federal wage rate but many people are willing to work at this rate.

Now, if the state too imposes its own wage minimum, higher than the federal minimum, the demand will further drop and supply rise. This will increase and widen the gap of excess supply.