Figure 6-9Refer to Figure 6-9.In this market, a minimum wage of $7.00 creates a labor

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The prompt asks about the effect of a minimum wage of $7.00 in the depicted market and provides an answer that says 'c. surplus of 4,000 worker hours.' However, the answer options are not listed in the provided data, so we cannot map the conclusion to a specific choice. Instead, we can reason through what the diagram implies about a $7.00 wage floor.

First, identify the wage floor in relation to the market equilibrium on the graph. The diagram shows price levels (for example, 24, 16, and 10) and a labeled equilibrium point where the supply and demand curves intersect. If the minimum wage is set at $7.00, we must compare this to the equilibrium wage shown in the graph. The straight lines and dashed lines suggest the market equilibrium occurs at a higher price level (above $7.00). That means the minimum wage of $7.00 is below the equilibrium wage.

Second, assess the consequence of a wage floor below the equilibrium. When a price floor (minimum wage) is set below the equilibrium price, it is effectively non-binding; the market continues to clear at the higher, equilibrium wage, and there is no surplus or shortage created by the floor. In practical terms, the quantity of labor supplied at $7.00 would equal or be less than the quantity demanded at that price, but since the market would naturally settle at the higher equilibrium wage, the floor does not constrain wages or employment.

Third, consider what would happen if the minimum wage were above the equilibrium wage. In that case, a surplus of labor (unemployment) would occur, because more workers would be willing to work at the higher wage than firms are willing to hire. The size of the surplus would be measured by the difference between quantity supplied and quantity demanded at the minimum wage in question.

Fourth, address the specific claim about a surplus of 4,000 worker hours. For a minimum wage of $7.00 to create a surplus, the $7.00 level would need to be above the equilibrium wage on the graph. Since the graph indicates a higher equilibrium price (wage) than $7.00, the $7.00 floor is non-binding and would not create a 4,000-hour surplus. The actual outcome, given a below-equilibrium floor, would be effectively zero surplus attributable to the floor (no binding effect).

Finally, given that the options are missing from the data, it is not possible to confirm which exact choice corresponds to the graph-based analysis. If the exam question expects a surplus figure, it would only be correct under a scenario where the minimum wage is set above the equilibrium wage, not at $7.00 below it. In summary: with a $7.00 minimum wage below the equilibrium wage, there is no binding effect and no surplus attributable to the minimum wage; a $7.00 floor above equilibrium would produce a labor surplus equal to the difference between supplied and demanded hours at that wage.

ECB1101 - S1 2025 Online Quiz 6

Figure 6-9Refer to Figure 6-9.In this market, a minimum wage of $7.00 creates a labor

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