Suppose that Congress passes a law requiring employers to provide employees some benefit (such as healthcare) that raises the cost of an employee by $2 per hour. Assume that firms were not providing such benefits prior to the legislation.

On the following graph, use the green line (triangle symbol) to show the effect this employer mandate has on the demand for labor.

New Demand New Supply Equilibrium Before Law Equilibrium After Law01234567891020181614121086420Wage (Dollars per hour) Quantity of Labor (Thousands)Demand Supply

Suppose employees place a value on this benefit exactly equal to its cost.On the preceding graph, use the purple line (diamond symbol) to show the effect this employer mandate has on the supply of labor. Suppose the wage is free to balance supply and demand. Use the black point (plus symbol) to indicate the equilibrium wage and level of employment beforethis law and use the grey point (star symbol) to indicate the equilibrium wage and level of employment afterthis law is implemented.

True or False: Employers and employees are made better off by this law.

True

False

Suppose that, before the mandate, the wage in this market was $1 above the minimum wage.

In this case, the wage rate with the employer mandate will be

per hour, which will lead to in the level of employment and in the level of unemployment.

Now suppose that workers do not value the mandated benefit at all.

Which of the following statements are true under this circumstance?Check all that apply.

The supply curve of labor doesn't shift at all.

The wage rate will decline by more than $2.

The equilibrium quantity of labor will decline.

Employees are better off than before the mandated benefit.

Employers are worse off than before the mandated benefit.