Explore BrainMass

Monopolies and minimum wages

Using an appropriate diagram, show and explain briefly how a rise in the minimum wage could result in higher employment in a monopolistic labor market. Could a similar increase in employment accompany the rise in the minimum wage if the labor market is not monopolistic? Explain your reasoning.

Solution Preview

See the attached file. Because the monopolist's marginal cost curve is above the supply curve, it can lower costs by offering W1. If a minimum wage W2 were ...

Solution Summary

Minimum wages and employment level in monopolistic markets.