Fast Food Wage Policy March 31, 2026March 31, 2026 ~ EconEye Admin In California, the FAST Act set the minimum wage at $20 per hour for fast-food workers.—calmatters.org Answer the following questions to check your understanding of the story. 1) The $20 wage law in the fast-food industry is an example of: a) a price ceiling b) a production quota c) a subsidy d) a price floor Wrong! - A price ceiling sets a maximum, not a minimum price. A production quota limits quantity, not wages. A subsidy is a government payment, not a wage law. Good Job! - A minimum wage is a price floor in the labor market. 2) If the equilibrium wage in fast food is above $20 per hour, the new law will a) have no effect on unemployment. b) increase unemployment. c) decrease unemployment. d) have an uncertain effect on unemployment. Wrong! - Workers are already being paid above the minimum wage, so the wage rate paid and unemployment does not change. The effect is certain: a non-binding minimum wage does not change unemployment. Well Done! - Workers are already being paid above the minimum wage, so the wage rate paid and unemployment does not change. 3) If the equilibrium wage in fast food is below $20 per hour, the new law will a) decrease unemployment. b) have an uncertain effect on unemployment. c) increase unemployment. d) have no effect on unemployment. Wrong! - A higher legal wage raises hiring cost, so firms lay off workers, not hire more. The effect is certain: a binding minimum wage increases unemployment. That's Right! - Firms pay the higher legal wage, lay off workers, and more workers look for jobs. Unemployment increases. 4) When the minimum wage is imposed, what is the maximum value of job search activity per hour for a California fast-food worker who is willing to work for $12 an hour? a) $12 an hour b) $32 an hour c) $8 an hour d) $20 an hour Wrong! - $12 is the minimum wage the worker is willing to work at. $20 is the legal minimum wage. $32 incorrectly adds instead of subtracting. Correct! - $20 − $12 = $8 in time and resources spent searching for jobs at the higher legal wage. 5) Is the outcome with the minimum wage efficient? a) No, for workers not hired, marginal cost exceeds marginal benefit. b) No, for workers hired, marginal cost exceeds marginal benefit. c) Yes, for workers hired, marginal benefit equals marginal cost. d) No, for workers not hired, marginal benefit exceeds marginal cost. Wrong! - MB = MC for workers hired, but MB > MC for some not hired, so the outcome is inefficient. Not hiring when MC > MB is efficient. Workers with MC > MB are not hired. You Got it! - The quantity of labor is inefficient because some workers have MB > MC but are not hired due to the higher legal wage. 6) Is the outcome with the minimum wage fair? The minimum wage delivers ________ result and imposes ________ rules. a) unfair; unfair b) unfair; fair c) fair; fair d) fair; unfair Wrong! - It does not impose fair rules because voluntary hiring deals don’t occur. It delivers an unfair result because some workers are laid off and worse off. Perfect! - Some workers are laid off and worse off; voluntary hiring deals do not occur at the higher legal wage. Close Quiz Share this: Share on Facebook (Opens in new window) Facebook Like this:Like Loading…
In California, the FAST Act set the minimum wage at $20 per hour for fast-food workers.—calmatters.orgIn California, the FAST Act set the minimum wage at $20 per hour for fast-food workers.—calmatters.org