One way to remove the excess labor supply problem from a minimum wage policy is to have the government hire all unemployed workers at the minimum wage. What is the key drawback of this version of a minimum wage policy?
A) The deadweight loss may increase substantially.
B) The cost to the government may be very large.
C) Consumer surplus losses increase further.
D) A and B are correct.
E) B and C are correct..
Question 2
Two firms, each producing different goods, can achieve a greater output than one firm producing both goods with the same inputs. We can conclude that the production process involves
A) diseconomies of scope.
B) economies of scale.
C) decreasing returns to scale.
D) increasing returns to scale.
