=+14.9 Policy and Business Application: Minimum Wage Labor Subsidy (cont’d): In exercise 13.10, we investigated the firm’s decisions in the presence of a government subsidy for hiring minimum wage workers. Implicitly, we assumed that the policy has no impact on the prices faced by the firm in question.

A. Suppose again that you operate a business that uses minimum wage workers , and capital k. The minimum wage is w, the rental rate for capital is r, and you are one of many identical businesses in the industry, each using a homothetic, decreasing returns to scale production process and each facing a recurring fixed cost F.