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2014 AP Microeconomics Free-Response Questions Free Download

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2)Ray’s Stable hires workers in a perfectly competitive factor market for unskilled labor.

  1. Using correctly labeled side-by-side graphs for the labor market and Ray’s Stable, show each of the following.
    1. The equilibrium wage and quantity for unskilled labor, labeled Wand Qrespectively
    2. he wage paid by Ray’s Stable and the quantity of unskilled labor hired, labeled Wand Qrespectively
  2. Is the marginal factor cost of unskilled labor for Ray’s Stable greater than, less than, or equal to WE? Explain.
  3. Now assume that the government imposes an effective minimum wage for unskilled labor.
    1. Show the minimum wage on your graphs in part (a), labeled WMIN
    2. On the labor market graph in part (a), show the quantity of unskilled labor supplied in the labor market as a result of the minimum wage, labeled QS
    3. As a result of the new minimum wage, will the marginal revenue product of the last worker hired by Ray’s Stable increase, decrease, or stay the same?

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