Problems 2, 3 2. Professor Pessimist argues before Congress that reducing the size of the military will have grave consequences for the typical U.S. worker. He argues that if a million individuals were released from the military and were instead employed in the civilian labor market, average wages in the civilian labor market would fall dramatically. Assume that the demand curve for civilian labor does not shift when workers are released from the military. First, draw a simple diagram depicting the effect of this influx of workers from the military. Next, using your knowledge of the definition of the own-wage elasticity of labor demand, the magnitude of this elasticity for the economy as a whole, and the size of civilian employment in comparison with this flood from the military, graph these events and estimate the magnitude of the reduction in wages for civilian workers as a whole. Do you concur with Professor Pessimist? . Suppose that the demand for burger flippers at fast-food restaurants in a small city is LD =300 20 W, where L = the L number of burger flippers and W = the wage in dollars per hour. The equilibrium wage is $4 per hour, but the government puts in place a minimum wage of $5 per hour. a. How does the minimum wage affect employment in these fast-food restaurants? Draw a graph to show what has happened, and estimate the effects on employment in the fast-food sector. b. Suppose that the city just mentioned has an uncovered sector where L_ = 100 + 80Wand L = 300 20W, before the minimum wage is put in place. Suppose that all the workers who lose their jobs as burger flippers because of the introduction of the minimum wage seek work in the uncovered sector. What happens to wages and employment in that sector? Draw a graph to show what happens, and analyze the effects on both wages and employment in the uncovered sector. e "~ T - S owwe n