The American demand and supply curves for labor cross at a wage rate of $25 per hour. However, American firms can hire as many foreign workers as they want to at a wage of $15 per hour. (Assume that foreign workers are exactly as productive as American workers.) A new law requires American firms to pay $25 an hour to Americans and to hire every American who wants to work at that wage. Firms may still hire any number of foreigners at $15 per hour.
a. Before the law is enacted, what wage do American workers earn? Illustrate the consumers' and producers' surpluses earned by American workers and American firms.
b. After the law is enacted, illustrate the number of Americans hired and the number of foreigners hired, the consumers' and producers' surpluses earned by American workers and American firms, and the deadweight loss.