Question: 1.4. In Chapter 8, we analyzed a minimum wage in the usual way, as a price floor, and we showed that a minimum wage creates

1.4. In Chapter 8, we analyzed a minimum wage in the usual way, as a price floor, and we showed that a minimum wage creates unemployment. Now suppose that firms must pay the minimum wage but they can adjust the working conditions, such as increasing the pace of work, reducing lunch breaks, cutting back on employee discounts, and so forth.

Will the minimum wage create (as much)

unemployment if firms adjust in this way?

Hint: Think of the balance in Figure 17.7.

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