Economics Equilibrium Effects?

Question

Suppose that a new law requires every firm to provide its workers with free parking spaces. The spaces are worth $200 a year to the works and cost the firms $500 a year to provide.

a) Show how this law affects the workers' labor supply curve, the firm's labor demand curve and the equilibrium wage rate

b) When the law is enacted, does the equilibrium wage go up or down? Does it change by more or by less than $200. Does it change by more or less than $500.

c) Is this law good for firms? Is it good for workers? Explain your reasons carefully.

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My answers:

a) S will shift to the right since more workers are willing to work at this higher wage (assuming the parking spaces count as additional wage - is this a correct assumption?). The firm's labor demand curve will shift to the left since it is more expensive to hire employees and thus D will go down. Thus, the equilibirum wage rate will decrease.

(ran out of space!)

Answer 1

It is the fixed cost that is going up.Annual fixed cost goes up.The firms average cost and marginal cost curves get shifted.It will not affect the wage rate.But the pricing of the product will get changed,if the comany decide that increase cost has to be passed on to customers.