Question: Consider a labor market with incomplete minimum wage coverage. For simplicity, assume that the labor market has a covered and an uncovered sector, a vertical

Consider a labor market with incomplete minimum wage coverage. For simplicity, assume that the labor market has a covered and an uncovered sector, a vertical labor supply curve, and that workers can move freely across the two sectors. Analyze the effects of minimum wage laws in the covered sector by addressing the following questions.

(a) In which direction does labor flow, and what happens to wages across the sectors?

(b) Does the minimum wage cause unemployment in the covered sector? Who are the winners and losers?

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