Question 15 Not yet answered Points out of 100 P Flag questi

Question 15 Not yet answered Points out of 1.00 P Flag question The clothing industry in Happy Valley consists of ten manufacturers. Each can hire zero, one, or two workers. If a manufacturer hires zero workers, it has no revenue. If it hires one worker, its revenue after deducting the cost of materials (but not the wage of workers) is $200 per day. If it hires two workers, this net revenue is $300 per day. There are 15 residents of Happy Valley who have a reservation wage of $80 per day and there are 10 more residents who have a reservation wage $130 per day. No one else is willing to work in this industry. How would the introduction of minimum wage of $120 per day affect total worker income (include both employed and unemployed workers) compared to the situation with no minimum wage? Select one: a. It would increase worker total income by $100 b. It would increase worker total income by $150 c. It would decrease worker total income by $100 d. No change e. We cannot answer this question because we do not know which workers (high reservation wage or low reservation wage) will be employed at the new minimum wage. O

Solution

Solution: No change

Working:

Residents

Minimum wage

15

80

1200

10

130

1300

2500

25* 120 = 3000

3000 - 2500 - (200+ 300) = Nil

Residents	Minimum wage
15	80	1200
10	130	1300
		2500