Answer
a) The demand for labor would decrease due to the increased cost of an employee.
b) Since employees would value the benefit equal to its cost, the employees value the benefit at 4 dollars per hour. In effect, this raises the overall wage that the employee receives. An increase in the overall wage would increase the supply of labor.
Work Step by Step
c) This law increases the wage paid to employees and decreases the level of employment. Both employees and employers are no better off.
d) The wage increases, the level of employment decreases, and the level of unemployment increases.
e) If employees don't value the benefits at all, then the wages to employees will decrease by less than the value of the benefits. Employers are worse off since they have fewer workers at higher wage levels, and employees are worse off (since there are fewer workers and are paid at a lower wage).
