Question

1.An effective minimum wage law introduced into a perfectly competitive labor market with complete coverage is expected to cause employment to:
A.rise.
B.fall.
C. remain unchanged.
D.change in an unpredictable manner.

2.An increase in an effective minimum wage in a monopsony labor market will cause employment to:
A.increase.
B.decrease.
C. remain unchanged.
D.change in an unpredictable manner, depending upon the magnitude of the increase in the minimum wage.

3.Suppose that a 10% increase in the wage results in a 5% reduction in employment. In this case, labor demand is said to be:

	A.	elastic
	B.	inelastic
	C.	unit elastic

4. The cross-wage (cross-price) elasticity of demand between labor and capital is positive when

A.	the substitution effect is larger than the scale effect.
	B.	the scale effect is larger than the substitution effect.
	C.	the wage rises, but not when the wage decreases.
	D.	None of the above is correct.