Suppose that Congress passes a law requiring employers to provide employees some benefit

Chapter 28, Problem Problems and Applications 28.9

(choose chapter or problem)

Suppose that Congress passes a law requiring employers to provide employees some benefit (such as healthcare) that raises the cost of an employee by $4 per hour. a. What effect does this employer mandate have on the demand for labor? (In answering this and the following questions, be quantitative when you can.) b. If employees place a value on this benefit exactly equal to its cost, what effect does this employer mandate have on the supply of labor? c. If the wage is free to balance supply anddemand, how does this law affect the wageand the level of employment? Are employersbetter or worse off? Are employees better orworse off?d. Suppose that, before the mandate, thewage in this market was $3 above theminimum wage. In this case, how doesthe employer mandate affect the wage,the level of employment, and the level ofunemployment?e. Now suppose that workers do not valuethe mandated benefit at all. How does thisalternative assumption change your answersto parts (b) and (c)?