Texaco employs workers on its oil rigs. The supply and demand for labor isD=1002pandS=10+p.

In equilibrium, what is the wage of labor?

p=unanswered

In equilibrium, what is the quantity of labor supplied?

Q=unanswered

Suppose now that the government sets a minimum wage of $40 for oil rig workers due to the dangers of the job.

In the new equilibrium, what is the wage of labor?

p=unanswered

In the new equilibrium, what is the quantity of labor that is employed?

Q=unanswered

What is the excess supply of labor?

unanswered

Consider a positive shock to labor demand. Texaco has discovered a new technology that increases their value from each worker, so they are willing to pay$xmore per worker. Find the minimumxsuch that the minimum wage is not binding.

x=unanswered

Under the new technology where$xis the minimum you found earlier, how manymoreworkers are hired than in the minimum wage scenario with old technology?unanswered

Now return to the conditions ofD=1002pandS=10+p.

What are the price elasticities of supply and demand at equilibrium? (Hint: Price elasticity of supply is positive. Price elasticity of demand is negative.)

S=unanswered

D=unanswered

The government noticed that when taxes on workers went up, wages also went up. Suppose that instead of a $40 minimum wage, the government taxes each worker by$z(withz>0) to raise worker wages.

Express the equilibrium take-home (post-tax) wage for workers as a function ofz:+z. Calculateand.

=unanswered

=unanswered

Express the tax incidence for workers asz. Calculate.

=unanswered

Was this strategy effective at raising take-home wages?

This strategy was completely effective

This strategy was partially effective

This strategy was ineffective

The effectiveness of this strategy is ambiguous