Microeconomics Essay Questions and Answers

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1. Analyze the benefits and costs of raising the minimum wage. There are many arguments that are in favor of raising the minimum wage, and many that are against raising the minimum wage. The biggest benefit to raising the minimum wage would be increasing the standard of living to low class families. The families spend more money and it circulates within the economy. Increasing the minimum wage can also help businesses. These hard working people will be motivated and encouraged to work harder at their jobs increasing productivity and hopefully boosting sales which in return helps the business out. Many of the minimum wage jobs are unwanted because of the low wages but if they were increased you would find more people willing to work at these places. These are the pros but there are also cons for raising the minimum wage. Raising minimum wage hurts small businesses. These businesses are in competitive markets and may not be able to afford the wage hike. Hours may have to be cut from employees or maybe even lay offs. Because of this employers may outsource their work to other people who will be more than happy to work for lower wages. Economists also claim that raising the minimum wage can cause inflation as businesses try to compensate by increasing the price of goods being sold. 2. Explain the concept of opportunity cost and the Law of Increasing Opportunity Costs. How does this concept influence what is produced? The definition of Opportunity Costs is “the loss of potential gain from other alternatives when one alternative is chosen.” Opportunity costs are usually involved in decision-making discussions about production. Weighing your options to see which will give you more production is Opportunity Cost. We use Opportunity Cost in our everyday lives without even knowing what it is. When we say to ourselves “Should I stay at this job, or get another a new
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