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Question
As the mayor of a local town, Wang has the power to repeal workplace safety laws. For construction workers building the local school, the repeal of all workplace safety laws would
a. reduce their wages because of less severe positive compensating differentials.
b. increase their wages because of less severe positive compensating differentials.
c. reduce their wages because of more severe positive compensating differentials.
d. increase their wages because of more severe positive compensating differentials.
e. result in no effect on their wages because of offsetting differentials.
Answer
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a. A surplus will continue to exist and will grow larger over time.
b. A surplus will continue to exist and will grow smaller over time.
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Suppose Solomon lives in a community with no price controls. What do you expect will happen if his town borders a community where there is a binding price ceiling on most products?
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