Traditional economic theory and its partisans have long maintained

Question

Traditional economic theory and its partisans have long maintained that increasing the minimum wage would actually have a negative effect on low-wage employment in the United States. Their argument is straightforward: since most employees normally produce just enough to offset their own wages, a higher wage makes some workers’ wages higher than is justified by what they contribute to output. The result is a rise in unemployment due to the elimination of jobs whose productivity falls below the new, higher productivity standard forced by the wage increase. A new study by Princeton economists David Card and Alan Krueger on the aftereffects of recent state and federal minimum wage increases casts doubt upon the extent to which this theory is applicable.

Card and Krueger examined the conventional wage theory's prediction that a minimum wage rise should simply lop off the lower edge of jobs. Their findings, however, indicate that just the opposite occurs: instead of being fired, the lowest wage workers are "swept up" to the new minimum. The rise also causes a concomitant increase for workers who earn more than the minimum as employers try to maintain the structure of wage differentials among different groups and kinds of employees. In New Jersey, for example, an increase in the state minimum wage in 1992 was followed by an increase in minimum wage employment at the higher rate. The minimum wage employment in neighboring Pennsylvania, which did not enact a higher rate, lagged behind that of New Jersey. Rather than dismissing conventional wage theory completely, however, Card and Krueger interpret the data as an indication that the theory is merely incomplete. In areas of the country where demand for workers is high, employers often voluntarily exceed the legal minimum in order to recruit the workers they need, and under such circumstances, raising the minimum wage will have no negative effect on employment. Employers will pay a relatively premium wage In order to recruit all the workers they need and to stabilize the workforce at a higher level of output performance. This indicates that employers have some leeway in relating their employees’ wages to their productivity.    1 
 1. The author of the passage would most likely agree with which of the following assertions about the minimum wage in the United States?

A. Unemployment of low-wage workers will invariably rise when wages are artificially inflated.
B. Minimum wage patterns in New Jersey have no demonstrable relevance to unemployment figures in Pennsylvania.
C. Conventional economic theory makes no valid predictions about the connection between minimum wage increases and unemployment trends.
D. It is possible to find some correlation between worker productivity and wages earned.
E. Minimum wage increases will expand employment in all sectors of the economy by increasing employee productivity.

2 
 2. In the second paragraph, the author mentions the results of Card and Krueger's focus on New Jersey in order to

A. strengthen their contention that minimum wage levels in the Northeastern US are artificially low
B. provide evidence for their conclusion that the reality of minimum wage hikes may sometimes contradict the results expected by traditional theory
C. prove that Pennsylvania's low-wage employment suffered as a result of New Jersey's wage increase
D. undermine the argument put forth by the Princeton economists that an inflation of minimum wages will result in loss of low-wage employment
E. introduce an example of a beneficial minimum wage increase that can be used as a model for a new economic theory

3 
 3. It can be inferred from the passage that “traditional economic theory" (line 1)

A. is an accurate predictor of unemployment rates resulting from circumstances other than minimum wage increases
B. is under attack from many academic economists, who believe that minimum wages in the US should be raised
C. provides an explanation for New Jersey's low-wage employment jump that is consistent with its predictions
D. has been replaced with a more modern hypothesis that asserts that minimum wage hikes are necessary for a healthy economy
E. may still provide an accurate prediction of the results of a minimum wage hike under conditions of low worker demand

4 
 4. The passage suggests that immediately prior to the 1992 increase in the state minimum wage, some New Jersey employers were

A. paying their employees the same minimum rate that employers in Pennsylvania were paying
B. experiencing economic difficulties and laying off minimum wage employees whose output was insufficient
C. lobbying for an increase in the minimum wage as a means to hire more workers and increase productivity
D. in some cases paying more than the mandated minimum wage because demand for low-wage workers was high
E. eliminating the wage structure that had been created under the discredited theories of traditional economists

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c93liu · Answer

Q1. The author of the passage would most likely agree with which of the following assertions about the minimum wage in the United States?

My answer is B).

A) Unemployment of low-wage workers will invariably rise when wages are artificially inflated. 
This is certainly the argument of the traditional economic theory as explained at the beginning of paragraph 1, but the NJ vs. PA experiment clearly contradicts this prediction, so cannot be something that the author would agree with.
 B) Minimum wage patterns in New Jersey have no demonstrable relevance to unemployment figures in Pennsylvania. 
Yes. This is almost an assumption to the NJ vs. PA experiment. Imagine that if this is not the case, that increased minimum wage in NJ actually suppresses minimum wage employment in the neighboring PA, then the conclusion reached by Card and Krueger becomes flawed as the integrity of this controlled social experiment is compromised by such correlation (in other words the experiment arm and the control arm are not truly independent).
 C) Conventional economic theory makes no valid predictions about the connection between minimum wage increases and unemployment trends. 
Although this might appear to be the conclusion from the Card and Krueger research, notice that their conclusion is more like resolving the paradox than contradicting the conventional wisdom: min. wage hikes lead to unemployment only if production = wages. If demand for workers is high, employers pay a premium over the minimum, such that the min. wage hikes have no negative impacts.
 D) It is possible to find some correlation between worker productivity and wages earned. 
The last sentence of the passage seems to dispute this - "employers have some leeway in relating their employees’ wages to their productivity".
 E) Minimum wage increases will expand employment in all sectors of the economy by increasing employee productivity. 
This is only true under special circumstances. See the NJ vs. PA study cited.

Q2. In the second paragraph, the author mentions the results of Card and Krueger's focus on New Jersey in order to

My answer is B). The mention is mainly to demonstrate how the empirical evidence contradicts predicted outcome from the traditional economic theory.

A) strengthen their contention that minimum wage levels in the Northeastern US are artificially low 
This purpose is never mentioned anywhere in the passage.
 B) provide evidence for their conclusion that the reality of minimum wage hikes may sometimes contradict the results expected by traditional theory 
Yes, matches with our thinking above.
 C) prove that Pennsylvania's low-wage employment suffered as a result of New Jersey's wage increase 
"as a result of" is incorrect. See our analysis of the independence requirement from Q1/B) above. Also, if anything the NJ vs. PA study is used as evidence, not the main purpose.
 D) undermine the argument put forth by the Princeton economists that an inflation of minimum wages will result in loss of low-wage employment 
The study is conducted by the Princeton economists (Card and Krueger) to support their conclusion, so would be weird if the purpose is to "undermine" their own argument. Also, "inflation of min. wages will result in low-wage employment loss" is not a view held by the 2 economists.
 E) introduce an example of a beneficial minimum wage increase that can be used as a model for a new economic theory 
"can be used as a model for a new economic theory" is wrong. The 2 economists merely argued that the traditional theory was "incomplete", not that it needs to be revamped.

Q3. It can be inferred from the passage that “traditional economic theory" (line 1)

My answer is E).

A) is an accurate predictor of unemployment rates resulting from circumstances other than minimum wage increases 
The entire passage is only focused on min. wage increases. We do not know anything about circumstances other than those.
 B) is under attack from many academic economists, who believe that minimum wages in the US should be raised 
We do not know whether the theory is under attack from many economists. We only know about 2 economists, and they seem to propose to expand rather than replace the theory.
 C) provides an explanation for New Jersey's low-wage employment jump that is consistent with its predictions 
No, the low-wage employment jump would contradict its predictions.
 D) has been replaced with a more modern hypothesis that asserts that minimum wage hikes are necessary for a healthy economy 
"has been replaced..." is wrong.
 E) may still provide an accurate prediction of the results of a minimum wage hike under conditions of low worker demand 
Yes. The conclusion from Card and Krueger is that the predictions are inaccurate with high worker demand. So the theory might still hold otherwise.

Q4. The passage suggests that immediately prior to the 1992 increase in the state minimum wage, some New Jersey employers were

My answer is D).

A) paying their employees the same minimum rate that employers in Pennsylvania were paying 
We know that NJ hiked min. wage, whereas PA did not. We do not know if the level of min. wages is the same between the 2 prior.
 B) experiencing economic difficulties and laying off minimum wage employees whose output was insufficient 
We know that increase in low-wage employment actually went up, suggesting that low-wage employment was already on the rise before the min. wage hike in NJ, and further accelerated after the hike. Seems to be the opposite of what B) is describing.
 C) lobbying for an increase in the minimum wage as a means to hire more workers and increase productivity 
We only know NJ increased min. wage. We do not know whether NJ lobbied for it, or why they increased it.
 D) in some cases paying more than the mandated minimum wage because demand for low-wage workers was high 
Yes. We know that the min. wage hike has no negative impact in NJ, and the reason is because they are in labor shortage (i.e., demand for workers was high), so they paid premium above the min. wage. This is exactly what D) is saying.
 E) eliminating the wage structure that had been created under the discredited theories of traditional economists 
This is completely not mentioned in the passage.

Gaudapada · Answer

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| 1 | 2 | 3 | 4 |
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| B | B | E | D |
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1. The author of the passage would most likely agree with which of the following assertions about the minimum wage in the United States?
 
   A. Unemployment of low-wage workers will invariably rise when wages are artificially inflated.  
This is what we would expect if we follow traditional economic theory. From  paragraph 1 ,
 
Hence the author would not be likely to agree with  A

B. Minimum wage patterns in New Jersey have no demonstrable relevance to unemployment figures in Pennsylvania.  
 CORRECT :  From  paragraph 1 ,
 
By presenting this example author is drawing a contrast between the two states-

New Jersey where minimum wage was increased, following which minimum wage employment increased

Pennsylvania where minimum wage was not increased, and minimum wage employment lagged behind new Jersey

The contrast would fail if the minimum wage law of New Jersey influenced the unemployment figures in Pennsylvania in any way, because it would not be a true comparison anymore. Therefore we can conclude that  B  is correct.

C. Conventional economic theory makes  no valid  predictions about the connection between minimum wage increases and unemployment trends.  
Author brings up the Card and Krueger study to indicate that the predictions of conventional economic theory are not accurate  in some cases . From  paragraph 2 ,
 
Author may agree that the predictions of conventional economic theory are inaccurate  in areas of the country where demand for workers is high , but Author makes does not state anywhere that Conventional economic theory makes  NO valid predictions .

D. It is possible to find some correlation between worker productivity and wages earned.  
In the passage, the author provides evidence that the demand for workers also plays a role in wages earnt.
 
And in the last line,
 
Author argues that employees  will have some leeway  in relating employees' wages to productivity, but this does not necessarily mean that the author believes that  it is possible  to find a correlation.

E. Minimum wage increases will expand employment in  all  sectors of the economy by increasing employee productivity.  
Author may agree that minimum wage increase will expand employment  in some situations (areas with high demand for workers) , but not that employment will expand in  ALL sectors of the economy .  E  is far too extreme.

-------------------------------------------------------------------------------------------------------------------------------------------------------------
 2. In the second paragraph, the author mentions the results of Card and Krueger's focus on New Jersey in order to

A. strengthen  their  contention that minimum wage levels in the Northeastern US are artificially low  
option  A  would imply that the Author holds a  personal position  that the minimum wage levels in Northeastern US are artificially low. Nowhere in the passage does the author take any such stance. Hence we can rule out  A  immediately.

B. provide evidence for their conclusion that the reality of minimum wage hikes may sometimes contradict the results expected by traditional theory  
 CORRECT :   From  paragraph 2 ,
 
The  result expected from traditional economic theory  was that lower end jobs would be lost.
Card and Kreuger then present the  New Jersey example  in order to contradict the  expected result

C. prove that Pennsylvania's low-wage employment suffered  as a result of  New Jersey's wage increase  
New Jersey's wage increase did not  cause  Pennsylvania to suffer from low-wage employment. Card and Kreuger are comparing the situation in both states, not implying that they are causally related in any way.

D. undermine the argument put forth by the  Princeton economists  that an inflation of minimum wages will result in loss of low-wage employment  
This is by far the strangest option. From  paragraph 1 ,
 
Card and Krueger  ARE  the  Princeton economists . They are not undermining their own theory.

E. introduce an example of a beneficial minimum wage increase that can be used as a model for a  new economic theory   
From  paragraph 2 ,
 
Card and Kreuger are not seeking to introduce a  new economic theory  since they do believe that traditional economic theory needs modifications, not replacement.
 Author never challenges this which leads us to conclude that  E  is incorrect.

-------------------------------------------------------------------------------------------------------------------------------------------------------------
 3. It can be inferred from the passage that “traditional economic theory" (line 1)

A. is an accurate predictor of unemployment rates resulting from circumstances other than minimum wage increases

In-fact we can infer the exact opposite. Traditional economic theory fails to accurately predict unemployment rates in certain situations.

B. is under  attack  from many academic economists, who believe that minimum wages in the US should be raised

There is no evidence of an  attack  on traditional economic theory by any economists. Even Card and Krueger do not outright dismiss traditional economic theory. 
 
This would suggest that they are in favor of modifying the theory to fit new data, and are not outright dismissing it. Hence we cannot infer that traditional economic theory is under  attack .

C. provides an explanation for New Jersey's low-wage employment jump that is consistent with its predictions

As with  A , It is the exact opposite. 
 
Traditional economic theory failed to predict the current outcome here. There was an increase in minimum wage employment, where we would expect to see a decrease as per TEC.

D. has been  replaced  with a more modern hypothesis that asserts that minimum wage hikes are necessary for a healthy economy 
The word  replaced  is the problem here. Card and Krueger seek to modify traditional economic theory to account for the examples they provided, but this does not mean that traditional economic theory has been  replaced .
Furthermore, the term  has been replaced  is in past tense, implying that traditional economic theory has already been replaced by a new theory. This cannot be inferred from the paragraph.

E. may still provide an accurate prediction of the results of a minimum wage hike under conditions of low worker demand  
 CORRECT :  
 
Card and Kreuger state that the theory is merely incomplete, and then offer an explanation as to why TEC failed to predict the outcomes in New Jersey. Under conditions of  high demand for workers , raising the minimum wage has no effect employment.
Since the theory is  only  being modified for conditions of  high demand for workers , we can conclude that the theory still provides an accurate prediction for conditions of  low worker demand

-------------------------------------------------------------------------------------------------------------------------------------------------------------
 4. The passage suggests that immediately prior to the 1992 increase in the state minimum wage, some New Jersey employers were

A. paying their employees the same minimum rate that employers in Pennsylvania were paying  
This is never stated in the paragraph. In the example, Pennsylvania is only brought up in contrast to New Jersey. The intent of the example is to show an example where traditional economic theory failed/was incomplete -

We only know from this quote that the minimum wage was increased in New Jersey, and not increased in Pennsylvania. Nowhere does the author mention the initial minimum rates of the two states.

B. experiencing economic difficulties and laying off minimum wage employees whose output was insufficient  
 
 Their  here refers to the  partisans of traditional economic theory .
The context of this line in the passage is that it is the predicted outcome of raising the minimum wage by Traditional economic theory . It does not apply to the New Jersey example at all. Author brings up the example to show a situation where Traditional economic theory incorrectly predicted the outcome.

C. lobbying for an increase in the minimum wage as a means to hire more workers and increase productivity  
The only information presented about New Jersey in the example is that the minimum wage was raised and minimum wage employment increased, which was unexpected as per traditional economic theory. Author does not mention any political aspect of how the law was passed (such as lobbying). Hence we can rule  C  out for being irrelevant.

D. in some cases paying more than the mandated minimum wage because demand for low-wage workers was high  
 CORRECT :   Card and Krueger offer this very explanation as to why traditional economic theory failed in the previous example (New Jersey vs Pennsylvania)
 
By saying the theory is incomplete (by showing the New Jersey example) and then offering an explanation, Card and Krueger are providing a  reason  as to why traditional economic theory failed in this case. 
 Reason  :  where demand for workers is high, employers often voluntarily exceed the legal minimum in order to recruit the workers they need .
Also,
 Under such circumstances, raising the minimum wage will have no negative effect on employment.  : from this we can conclude that the circumstances existed  prior  to raising the minimum wage.

E. eliminating the wage structure that had been created under the discredited theories of traditional economists 
There is only one mention of wage structure in the passage. From  paragraph 2 ,
 
In context, this is the explanation provided by Card and Krueger as to why the minimum wage employment level unexpectedly increased, rather than decreased (as predicted by Traditional economic theory). If this did indeed occur in New Jersey, It would have to occur  after  the minimum wage was increased, not  prior  as the question prompt suggests. We are looking for something that could be true  before  the law was passed.

Nirmesh83 · Answer

1.D 2.B 3.E 4.C I took 11 mins. to answer this passage

SomeOneUnique · Answer

According to the best of my ability, kindly find the answer explanations below.

1. The author of the passage would most likely agree with which of the following assertions about the minimum wage in the United States?

A. Unemployment of low-wage workers will invariably rise when wages are artificially inflated. => Author sides new theory so we can say artificially inflated wages would lead to more employment. This choice mentions opposite.  INCORRECT 
B. Minimum wage patterns in New Jersey have no demonstrable relevance to unemployment figures in Pennsylvania. => It is incorrect to say 'no demonstrable relevance' because some inference can be made.  INCORRECT 
C. Conventional economic theory makes no valid predictions about the connection between minimum wage increases and unemployment trends. => Conventional economic theory is about that relationship.  INCORRECT 
D. It is possible to find some correlation between worker productivity and wages earned. => Yes we can infer this as there is some correlation between worker productivity and wages earned. Para 1 line 2 directly mentions stating "a higher wage makes some workers’ wages higher than is justified by what they contribute to output (productivity)."  CORRECT 
E. Minimum wage increases will expand employment in all sectors of the economy by increasing employee productivity. => There are certain cases in which employment will expand and certain cases in which employment may not expand. Thus this choice is not infer able.  INCORRECT

2. In the second paragraph, the author mentions the results of Card and Krueger's focus on New Jersey in order to

A. strengthen their contention that minimum wage levels in the Northeastern US are artificially low => Passage does not mention 'Northeastern'.  INCORRECT 
B. provide evidence for their conclusion that the reality of minimum wage hikes may sometimes contradict the results expected by traditional theory => Author mentions the results of Card and Krueger's to show contradiction.  CORRECT 
C. prove that Pennsylvania's low-wage employment suffered as a result of New Jersey's wage increase => Reason is common but the two events are mutually exclusive. They do not affect each other.  INCORRECT 
D. undermine the argument put forth by the Princeton economists that an inflation of minimum wages will result in loss of low-wage employment => This option means both Princeton economists undermine their own argument.  INCORRECT 
E. introduce an example of a beneficial minimum wage increase that can be used as a model for a new economic theory => Simply giving an example does not allow us to infer that it can be modeled.  INCORRECT

3. It can be inferred from the passage that “traditional economic theory" (line 1)

A. is an accurate predictor of unemployment rates resulting from circumstances other than minimum wage increases => “traditional economic theory" only predicts the increase or decrease. It does not give accurate rates.  INCORRECT 
B. is under attack from many academic economists, who believe that minimum wages in the US should be raised => Just 2 economists can not be called many. Also, para 2 line 6 says " Rather than dismissing  conventional wage theory completely, however, Card and Krueger interpret the data as an indication that the  theory is merely incomplete ."
These 2 facts, that 
1. Card and Krueger do not dismiss the “traditional economic theory" and
2. Card and Krueger believe “traditional economic theory" is incomplete
tell us that  Card and Krueger were not attacking rather wanted the theory to complete by filling the gaps  for scenarios that traditional theory did not cover. Hence C is  INCORRECT 
C. provides an explanation for New Jersey's low-wage employment jump that is consistent with its predictions => 
“traditional economic theory":  increasing the minimum wage  will result in  rise in unemployment . (from para 1 line 1-3)
New Jersey's example:  an increase in minimum wage  was followed by an  increase in  minimum wage  employment  at the higher rate. (from para 2 line 4)
Thus C is  INCORRECT .
D. has been replaced with a more modern hypothesis that asserts that minimum wage hikes are necessary for a healthy economy => Two different views are presented. New may replace the traditional or may not replace. Also based on our knowledge given by the passage, we do not know what is a healthy economy.  INCORRECT 
E. may still provide an accurate prediction of the results of a minimum wage hike under conditions of low worker demand => If A leads to B is given, then we  MAY  infer not A leads to C. Because “traditional economic theory" partially takes into consideration minimum wage hike effect but does not specify the scenario of (low/high) worker demand, we can assume that it may predict results for low worker demand scenario. Hence E is best of 5.  CORRECT

4. The passage suggests that immediately prior to the 1992 increase in the state minimum wage, some New Jersey employers were

A. paying their employees the same minimum rate that employers in Pennsylvania were paying => The states did not compare the minimum rate with each other that employers were paying .  INCORRECT 
B. experiencing economic difficulties and laying off minimum wage employees whose output was insufficient => This seems related to traditional view but New Jersey example is mentioned supporting results of new study.  INCORRECT 
C. lobbying for an increase in the minimum wage as a means to hire more workers and increase productivity => New Jersey employers wanted to hire workers they need so passage suggests that prominently then 'productivity'.  INCORRECT 
D. in some cases paying more than the mandated minimum wage because demand for low-wage workers was high => Before the increase employers wanted to hire workers they need, so employers were voluntarily exceeding legal limits.  CORRECT 
E. eliminating the wage structure that had been created under the discredited theories of traditional economists => Wage structure was maintained not eliminated. Para 2 line 2 : "The rise also causes a concomitant increase for workers who earn more than the minimum as  employers try to maintain the structure of wage  differentials among different groups and kinds of employees. ".  INCORRECT

ash124 · Answer

Understand the passage and create a map: 
A conventional theory is presented and than refuted 
Later, they tried to find a common ground (Rather than dismissing conventional wage theory completely, however, Card and Krueger interpret the data as an indication that the theory is merely incomplete)

1. The author of the passage would most likely agree with which of the following assertions about the minimum wage in the United States?

A. Unemployment of low-wage workers will invariably rise when wages are artificially inflated.
 Mentioned but not fully supported 
B. Minimum wage patterns in New Jersey have no demonstrable relevance to unemployment figures in Pennsylvania.
 Not given 
C. Conventional economic theory makes no valid predictions about the connection between minimum wage increases and unemployment trends.
 opposite 
D. It is possible to find some correlation between worker productivity and wages earned.
 Given in the last paragraph. 
E. Minimum wage increases will expand employment in all sectors of the economy by increasing employee productivity.
 Not given

Answer D

2. In the second paragraph, the author mentions the results of Card and Krueger's focus on New Jersey in order to

A. strengthen their contention that minimum wage levels in the Northeastern US are artificially low
 Not given 
B. provide evidence for their conclusion that the reality of minimum wage hikes may sometimes contradict the results expected by traditional theory
 Supported 
C. prove that Pennsylvania's low-wage employment suffered as a result of New Jersey's wage increase
 Not given 
D. undermine the argument put forth by the Princeton economists that an inflation of minimum wages will result in loss of low-wage employment
 Princeton economists are Card and Krueger 
E. introduce an example of a beneficial minimum wage increase that can be used as a model for a new economic theory
 New theory is not mentioned

Answer B

3. It can be inferred from the passage that “traditional economic theory" (line 1)

A. is an accurate predictor of unemployment rates resulting from circumstances other than minimum wage increases
 too strong 
B. is under attack from many academic economists, who believe that minimum wages in the US should be raised
 Not given 
C. provides an explanation for New Jersey's low-wage employment jump that is consistent with its predictions
 Not given 
D. has been replaced with a more modern hypothesis that asserts that minimum wage hikes are necessary for a healthy economy
 Not given 
E. may still provide an accurate prediction of the results of a minimum wage hike under conditions of low worker demand
 Given in the last paragraph.

Answer E

4. The passage suggests that immediately prior to the 1992 increase in the state minimum wage, some New Jersey employers were

A. paying their employees the same minimum rate that employers in Pennsylvania were paying
Possible
B. experiencing economic difficulties and laying off minimum wage employees whose output was insufficient
 Not given 
C. lobbying for an increase in the minimum wage as a means to hire more workers and increase productivity
 Not given 
D. in some cases paying more than the mandated minimum wage because demand for low-wage workers was high
 We don't know about high demand in New Jersey 
E. eliminating the wage structure that had been created under the discredited theories of traditional economists   
 Not given

Answer A

Sellby · Answer

Understanding the passage:

Paragraph 1: 
Argument of Traditional economic theory(TET) & its supporters is put forth and all the reasoning behind it is explained. A new study that casts doubt on TET's applicability and expected outcome is introduced.

Paragraph 2: 
Findings of the new study are explained and an example used in the study is explained. Researchers conclusion based on the analysis of the statistics did not dismiss TET but labelled it as incomplete and suggested a qualifier to it(that TET will still be applicable in "certain" situations and not in "certain" situations).

Question 1: Answer IMO D 
1. The author of the passage would most likely agree with which of the following assertions about the minimum wage in the United States?

A. Unemployment of low-wage workers will invariably rise when wages are artificially inflated. 
This is precisely what the author intends to refute by citing the study of Card and Krueger.
 B. Minimum wage patterns in New Jersey have no demonstrable relevance to unemployment figures in Pennsylvania. 
The author cites an increase in minimum wage employment at the increased wage rate in new Jersey. Is is possible that at least a little bit of this increase MIGHT have been contributed by Pennsylvanians securing jobs in New Jersey, attracted by the wage increase, thus  altering  Pennsylvania's unemployment figure.
 C. Conventional economic theory makes no valid predictions about the connection between minimum wage increases and unemployment trends. 
It's clear that the author agrees with Card and Krueger. And they argue that the conventional theory is just incomplete and thus its predictions are still valid in certain situations. So, the author should also agree with this. 
 D. It is possible to find some correlation between worker productivity and wages earned. 
Last two sentences say that employers raise wage to "stabilize the workforce at a higher level of output performance(i.e. Productivity)". So, this indicates  some  correlation, at least. Also, employers need not, in this case, strictly correlate worker productivity and wages earned and may have  some  leeway. Even with this "leeway",  some  correlation can still be established.
 E. Minimum wage increases will expand employment in all sectors of the economy by increasing employee productivity. 
With Card and Krueger saying that TET is merely "incomplete" and will still hold true in certain situations, this statement above cannot be concluded/agreed by the author. Minimum wage increases MAY NOT expand employment in all sectors, in a place where demand for workers is so low.

Question 2: Answer IMO B 
2. In the second paragraph, the author mentions the results of Card and Krueger's focus on New Jersey in order to

A. strengthen their contention that minimum wage levels in the Northeastern US are artificially low 
The author only notes the wage increase in a State but whether such wages are  low  or whether it's  artificial  is never explained.
 B. provide evidence for their conclusion that the reality of minimum wage hikes may sometimes contradict the results expected by traditional theory 
True. Author says Card and Krueger's conclusion "casts doubt" on the predictions of traditional theory. In explaining their study, author cites New Jersey's case to provide evidence.
 C. prove that Pennsylvania's low-wage employment suffered as a result of New Jersey's wage increase 
This statement can be assumed true but not always true. Nevertheless, the author mentions New Jersey to bolster Card and Krueger's conclusion and to "cast doubt".
 D. undermine the argument put forth by the Princeton economists that an inflation of minimum wages will result in loss of low-wage employment 
No Princeton economist put forth such an argument.
 E. introduce an example of a beneficial minimum wage increase that can be used as a model for a new economic theory 
Neither the author nor the study states that a beneficial minimum wage increase that can be used as a model for a new economic theory

Question 3: Answer IMO E 
3. It can be inferred from the passage that “traditional economic theory" (line 1)

A. is an accurate predictor of unemployment rates resulting from circumstances other than minimum wage increases 
Unemployment rates resulting from circumstances other than minimum wage increases is never discussed in the passage.
 B. is under attack from many academic economists, who believe that minimum wages in the US should be raised 
"attack from many academic economists" is not indicated in the passage, especially, attack by those who want to raise minimum wage. So far, as per the passage, the author is only one that seems to "slightly" attack TET by saying "casts doubt". Perhaps, we can add Card and Krueger but that's not "many academic economists" though! Also, we don't know all 3 of them back minimum wage raise.
 C. provides an explanation for New Jersey's low-wage employment jump that is consistent with its predictions 
What happened in the case of New Jersey's low-wage employment  jump  is certainly inconsistent with TET's predictions.
 D. has been replaced with a more modern hypothesis that asserts that minimum wage hikes are necessary for a healthy economy 
No such modern hypothesis is indicated by the passage.
 E. may still provide an accurate prediction of the results of a minimum wage hike under conditions of low worker demand 
This is exactly why "Card and Krueger interpret the data as an indication that the theory is  merely  incomplete". The next sentence explains what happens in high worker demand conditions while the result of low demand condition can be implied.

Question 4: Answer IMO D 
4. The passage suggests that immediately prior to the 1992 increase in the state minimum wage, some New Jersey employers were

A. paying their employees the same minimum rate that employers in Pennsylvania were paying 
This is never suggested in the passage.
 B. experiencing economic difficulties and laying off minimum wage employees whose output was insufficient 
Again, this is never indicated of New Jersey employers. Only, the wage raise and the statistics of the outcome were presented. No information on the situation prior to increase is given.
 C. lobbying for an increase in the minimum wage as a means to hire more workers and increase productivity 
Though, the demand for more workers and for increasing productivity was indicated, whether some New Jersey employers were lobbying is unknown.
 D. in some cases paying more than the mandated minimum wage because demand for low-wage workers was high 
Correct. The study says raising the minimum wage will have no negative effect on employment in cases where demand for low-wage workers is high(in para 2). And this was deduced from the outcome of the raise in New Jersey. So, it can be inferred that some New Jersey employers were already paying more.
 E. eliminating the wage structure that had been created under the discredited theories of traditional economists 
It's unclear that New Jersey employers even cared about theories of traditional economists in general.

800gal · Answer

ANSWERS: 1. D 2. B 3. E 4. D https://gmatclub.com/forum/download/file.php?mode=view&id=64054 1. The author of the passage would most likely agree with which of the following assertions about the minimum wage in the United States? Given what is written in the passage, the AUTHOR would most likely agree with the correct answer. Focus on what the author maintains as his viewpoint. Also a MOST likely to be true answer can have a little ambiguity, it just needs to be the best out of five. If you’ve kept a close look at the tone of the passage, the author objectively goes through passage and ONLY includes a personal anecdote in the end which is “This indicates that employers have some leeway in relating their employees’ wages to their productivity.” A.Unemployment of low-wage workers will invariably rise when wages are artificially inflated. The author has already presented findings from two Economists that this is a disputed presumption. The unemployment didn’t actually rise when the wages inflated. B. Minimum wage patterns in New Jersey have no demonstrable relevance to unemployment figures in Pennsylvania. The passage compares NJ and PENS as two states that enacted and didn’t enact minimum wage hikes and the conflicting results. So clearly the author must think there is SOME relative relationship, otherwise why compare? C. Conventional economic theory makes no valid predictions about the connection between minimum wage increases and unemployment trends. Remember the correct answer is something that the AUTHOR would agree with. The author doesn’t outright dismiss the conventional theory at all, just like the TWO economists didn’t. D. It is possible to find some correlation between worker productivity and wages earned. CORRECT The passage indicates that this conflicted finding by the two economists could’ve been due to high demand for the employees as it is, making employers willing to pay more anyway. So therefore higher wages CAN be paid for higher productivity as indicated by the line “This indicates that employers have some leeway in relating their employees’ wages to their productivity.” E. Minimum wage increases will expand employment in all sectors of the economy by increasing employee productivity. Untrue. We do not know that minimum wage increase increases productivity in general. The comparison is between min. wage and EMPLOYMENT 2. In the second paragraph, the author mentions the results of Card and Krueger's focus on New Jersey in order to Role questions are easily answerable using a passage map ( attached ). Rephrase this as “ The author put this here to do what?” A.strengthen their contention that minimum wage levels in the Northeastern US are artificially low No such contention was made that the minimum wage levels are “artifically low” B. provide evidence for their conclusion that the reality of minimum wage hikes may sometimes contradict the results expected by traditional theory CORRECT True, New Jersey was mentioned as an INSTANCE of the conflicting findings of the two economists. (Written in the passage map) C. prove that Pennsylvania's low-wage employment suffered as a result of New Jersey's wage increase The two states were certainly compared however one state didn’t suffer because of the other for sure. D. undermine the argument put forth by the Princeton economists that an inflation of minimum wages will result in loss of low-wage employment This is false, the princeton economists never asserted this, this is asserted by the traditional wage theory the two economists THREW INTO QUESTION. E. introduce an example of a beneficial minimum wage increase that can be used as a model for a new economic theory No modelling of new theories is mentioned or hinted at in this passage. In fact the two economists didn’t make their own theory with the findings, insisting that the old theory isn’t wrong, but just incomplete (hinting that the old theory will be kept) 3. It can be inferred from the passage that “traditional economic theory" (line 1) INFERENCE —> The answer choice MUST BE TRUE given what is written about TRADITIONAL ECONOMIC THEORY is true. Let’s recap what was mentioned about Traditional Economic Theory -> If min. wages are increased, unemployment will increase too. (Relates productivity and wages) It was thrown into question by two economists and their findings The two economists maintain that it isn’t wrong, just incomplete. A.is an accurate predictor of unemployment rates resulting from circumstances other than minimum wage increases Is it ? The two economists proved different results didn’t they? FALSE B. is under attack from many academic economists, who believe that minimum wages in the US should be raised No such attack or assertions by academic economists is mentioned. This is way beyond the scope of the passage C. provides an explanation for New Jersey's low-wage employment jump that is consistent with its predictions Traditional theory would’ve predicted that NJ’s employement would fall in response to the min wage HIKE. This is FALSE. D. has been replaced with a more modern hypothesis that asserts that minimum wage hikes are necessary for a healthy economy No it hasn’t. The the theory was never replaced as per the passage, thrown it to question or possibly altered. E. may still provide an accurate prediction of the results of a minimum wage hike under conditions of low worker demand. CORRECT Tricky But TRUE. We can sort of understand as per the tone of the passage that the traditional economic theory isn’t being dismissed for some reason. So it must hold true somewhere. As per the last paragraph “ In areas of the country where demand for workers is high, employers often voluntarily exceed the legal minimum in order to recruit the workers they need,” So this new finding might actually be because the demand was high as it is, so the employers had no CHOICE but to “sweep them up” into the new wage bracket, thereby paying more. If the demand didn’t exist, why would the employer bother paying more? 4. The passage suggests that immediately prior to the 1992 increase in the state minimum wage, some New Jersey employers were This is specifically an inference question about the NJ example, the correct answer must be the MOST supported one by the passage. A. paying their employees the same minimum rate that employers in Pennsylvania were paying Tempting. What is being compared though? NJ increased it’s wages, and the employment only increased. Pennsylvania didn’t increase it’s wages, so their employment rate LAGGED BEHIND THAT OF NJ’s. ( So it could’ve fell, or stayed stagnant, all we know is that NJ’s increased. In what possible way can we know if NJ’s and P’s min. wages were the same? There is no way to infer this. B. experiencing economic difficulties and laying off minimum wage employees whose output was insufficient We know nothing about the economic difficulties of NJ prior to 1992. C. lobbying for an increase in the minimum wage as a means to hire more workers and increase productivity Again we know nothing about the employers lobbying for higher minimum wage. This choice is also illogical, why would they need to LOBBY for increase in the min. wage if they want to hire workers at a higher wage? Can’t they just hire for the higher wage? D. in some cases paying more than the mandated minimum wage because demand for low-wage workers was high CORRECT Passage 2 contends that if the place in question has high demand for low wage workers anyway, then a min. wage hike wouldn’t have a negative impact on the employment at all. We know for FACT that NJ’s employment soared after the min. wage hike. It could be very possible that the demand for these workers was certainly high and could explain the sudden rise in employment. E. eliminating the wage structure that had been created under the discredited theories of traditional economists We do not know of these “discredited theories” by traditional economists. The one theory mentioned has not been discredited either. We also do not know what the wage structure was like before 1992 or whether it was being eliminated. This is certainly not supported. 10Passage Map .png

sunitapandey · Answer

Para1:

As per traditional economic theory:

Increasing the minimum wage would have a negative effect on the low wage employment in US.
Supporting argument: Increasing the wage makes some workers' wage higher than what they contribute to output.
This further leads to unemployment.

The new study by Princeton economists David Card and Alan Krueger casts doubt on the the extent to which the traditional economic theory is applicable.

Para2:

As per Card and Krueger's findings instead of being fired, the lowest wage workers swept up to the new minimum.
It increases the number of workers earning more than minimum.

Author cites the example of wage increase in New Jersey in 1992 which was followed by an increase in wage at the higher rate.
To support this point he gave the example of Pennsylvania which did not enact a higher rate and a lower minimum wage than New Jersey.

Card and Krueger did not dismiss the conventional theory completely but believed it is incomplete.
 They gave the example that in areas with high demand for workers the employers often pay more than the legal minimum to recruit.
 And this does not have any negative effect.
 Giving a premium wage helps in stabilizing the workforce at a higher level of output.

The author finally concludes that employers relate the workers' wage to their productivity.

1. The author of the passage would most likely agree with which of the following assertions about the minimum wage in the United States?

A. Unemployment of low-wage workers will invariably rise when wages are artificially inflated.
B. Minimum wage patterns in New Jersey have no demonstrable relevance to unemployment figures in Pennsylvania.
C. Conventional economic theory makes no valid predictions about the connection between minimum wage increases and unemployment trends.
D. It is possible to find some correlation between worker productivity and wages earned.
 Correct 
E. Minimum wage increases will expand employment in all sectors of the economy by increasing employee productivity.

2. In the second paragraph, the author mentions the results of Card and Krueger's focus on New Jersey in order to

A. strengthen their contention that minimum wage levels in the Northeastern US are artificially low
B. provide evidence for their conclusion that the reality of minimum wage hikes may sometimes contradict the results expected by traditional theory
 Correct 
C. prove that Pennsylvania's low-wage employment suffered as a result of New Jersey's wage increase
D. undermine the argument put forth by the Princeton economists that an inflation of minimum wages will result in loss of low-wage employment
E. introduce an example of a beneficial minimum wage increase that can be used as a model for a new economic theory

3. It can be inferred from the passage that “traditional economic theory" (line 1)

A. is an accurate predictor of unemployment rates resulting from circumstances other than minimum wage increases
B. is under attack from many academic economists, who believe that minimum wages in the US should be raised
 Correct 
C. provides an explanation for New Jersey's low-wage employment jump that is consistent with its predictions
D. has been replaced with a more modern hypothesis that asserts that minimum wage hikes are necessary for a healthy economy
E. may still provide an accurate prediction of the results of a minimum wage hike under conditions of low worker demand

4. The passage suggests that immediately prior to the 1992 increase in the state minimum wage, some New Jersey employers were

A. paying their employees the same minimum rate that employers in Pennsylvania were paying
B. experiencing economic difficulties and laying off minimum wage employees whose output was insufficient
C. lobbying for an increase in the minimum wage as a means to hire more workers and increase productivity
D. in some cases paying more than the mandated minimum wage because demand for low-wage workers was high
E. eliminating the wage structure that had been created under the discredited theories of traditional economists
 Correct

akash2703 · Answer

1. The author of the passage would most likely agree with which of the following assertions about the minimum wage in the United States?

IMO C

A. Unemployment of low-wage workers will invariably rise when wages are artificially inflated.
   
B. Minimum wage patterns in New Jersey have no demonstrable relevance to unemployment figures in Pennsylvania.
   
C. Conventional economic theory makes no valid predictions about the connection between minimum wage increases and unemployment trends.
   
D. It is possible to find some correlation between worker productivity and wages earned.
   
E. Minimum wage increases will expand employment in all sectors of the economy by increasing employee productivity

2. In the second paragraph, the author mentions the results of Card and Krueger's focus on New Jersey in order to

IMO B

A. strengthen their contention that minimum wage levels in the Northeastern US are artificially low
   
B. provide evidence for their conclusion that the reality of minimum wage hikes may sometimes contradict the results expected by traditional theory
   
C. prove that Pennsylvania's low-wage employment suffered as a result of New Jersey's wage increase
   
D. undermine the argument put forth by the Princeton economists that an inflation of minimum wages will result in loss of low-wage employment
   
E. introduce an example of a beneficial minimum wage increase that can be used as a model for a new economic theory

3. It can be inferred from the passage that “traditional economic theory" (line 1)

IMO B

A. is an accurate predictor of unemployment rates resulting from circumstances other than minimum wage increases
   
B. is under attack from many academic economists, who believe that minimum wages in the US should be raised
   
C. provides an explanation for New Jersey's low-wage employment jump that is consistent with its predictions
   
D. has been replaced with a more modern hypothesis that asserts that minimum wage hikes are necessary for a healthy economy
   
E. may still provide an accurate prediction of the results of a minimum wage hike under conditions of low worker demand

4. The passage suggests that immediately prior to the 1992 increase in the state minimum wage, some New Jersey employers were

IMO C

A. paying their employees the same minimum rate that employers in Pennsylvania were paying
   
B. experiencing economic difficulties and laying off minimum wage employees whose output was insufficient
   
C. lobbying for an increase in the minimum wage as a means to hire more workers and increase productivity
  
 D. in some cases paying more than the mandated minimum wage because demand for low-wage workers was high
   
E. eliminating the wage structure that had been created under the discredited theories of traditional economists

RohitSaluja · Answer

1. The author of the passage would most likely agree with which of the following assertions about the minimum wage in the United States?  
Given it is a specific question let's look at each option choices carefully

A. The unemployment of low-wage workers will invariably rise when wages are artificially inflated.  
No author does not agree with this as the author introduced Princeton economists in the passage to mention that traditional the theory might be incomplete

B. Minimum wage patterns in New Jersey have no demonstrable relevance to unemployment figures in Pennsylvania. 
The passage mentions that "The minimum wage employment in neighboring Pennsylvania, which did not enact a higher rate, lagged behind that of New Jersey" hence this cannot be the right answer

C. Conventional economic theory makes no valid predictions about the connection between minimum wage increases and unemployment trends. 
The author only mentions that traditional theory might be incomplete but does not mention that it makes no valid prediction, this is too strong as an option

D. It is possible to find some correlation between worker productivity and wages earned. 
The last line of the passage is "This indicates that employers have some leeway in relating their employees’ wages to their productivity." hence this is the correct answer choice

E. Minimum wage increases will expand employment in all sectors of the economy by increasing employee productivity. 
This is too generic a statement and nowhere in the passage any support is provided for this

2. In the second paragraph, the author mentions the results of Card and Krueger's focus on New Jersey in order to  
The passage mentions that "Their findings, however, indicate that just the opposite occurs" hence the point of mentioning result was to show that oppose of what traditional theory indicate can occur. Now let's look at the option choices

A. strengthen their contention that minimum wage levels in the Northeastern US are artificially low 
This was not the intent of mentioning the results of the study

B. provide evidence for their conclusion that the reality of minimum wage hikes may sometimes contradict the results expected by traditional theory 
This aligns with our analysis, and hence the correct answer choice

C. prove that Pennsylvania's low-wage employment suffered as a result of New Jersey's wage increase 
This was not the intent of mentioning the results of the study

D. undermine the argument put forth by the Princeton economists that an inflation of minimum wages will result in loss of low-wage employment 
This was not the intent of mentioning the results of the study

E. introduce an example of a beneficial minimum wage increase that can be used as a model for a new economic theory 
This was not the intent of mentioning the results of the study

3. It can be inferred from the passage that “traditional economic theory" (line 1)  
As it is specific question, let us directly look at the answer choices

A. is an accurate predictor of unemployment rates resulting from circumstances other than minimum wage increases 
The passage mentions that the traditional theory might not be complete, so eliminate this

B. is under attack from many academic economists, who believe that minimum wages in the US should be raised 
The passage never mentioned that the trad. theory is under attack from  many  economists. hence eliminate this

C. provides an explanation for New Jersey's low-wage employment jump that is consistent with its predictions 
The traditional theory failed to provide the explanations, hence eliminate this

D. has been replaced with a more modern hypothesis that asserts that minimum wage hikes are necessary for a healthy economy 
Same as A

E. may still provide an accurate prediction of the results of a minimum wage hike under conditions of low worker demand 
Hope we like this one, as towards the end of the passage the author mentions " In areas of the country where demand for workers is high, employers often voluntarily exceed the legal minimum in order to recruit the workers they need, and under such circumstances, raising the minimum wage will have no negative effect on employment" and it could be only this portion that traditional theory does not explain but on the other side of the spectrum it may still provide accurate prediction, hence this is the correct answer

4. The passage suggests that immediately prior to the 1992 increase in the state minimum wage, some New Jersey employers were  
As it is a specific question type let's directly look at the answer choices

A. paying their employees the same minimum rate that employers in Pennsylvania were paying 
This is the correct answer choice

B. experiencing economic difficulties and laying off minimum wage employees whose output was insufficient 
From nowhere in the passage this could be inferred

C. lobbying for an increase in the minimum wage as a means to hire more workers and increase productivity 
From nowhere in the passage this could be inferred

D. in some cases paying more than the mandated minimum wage because demand for low-wage workers was high 
From nowhere in the passage this could be inferred

E. eliminating the wage structure that had been created under the discredited theories of traditional economists 
From nowhere in the passage this could be inferred

Sajjad1994 · Answer

OA of this passage is posted: It is:

DBED

Excellent work by  800gal  and  ShellyB

Good work by  c93liu   Gaudapada  and  RohitSaluja .

And this comes to the end of this competition, Thank you to everyone who participated in this event. I will announce the winners tomorrow.

Good luck.

MuskaanMittal · Answer

Question Explanation

QUESTION 4

The phrase The passage suggests indicates that this is an inference question. The task of the question is indicated by the word suggests. The subject of the question is some New Jersey employers during the period immediately prior to 1992. In order to answer the question, determine what the passage states about the subject and evaluate the answer choices, eliminating any choice which cannot be supported by the text. According to the passage, In New Jersey, for example, an increase in the state minimum wage in 1992 was followed by an increase in minimum wage employment at the higher rate. Thus, it is safe to conclude that minimum wage employment in New Jersey was lower overall prior to 1992. This example is used as support for the claim that In areas of the country where demand for workers is high, employers often voluntarily exceed the legal minimum in order to recruit the workers they need, and under such circumstances, raising the minimum wage will have no negative effect on employment. So it stands to reason that some employers in New Jersey would have voluntarily exceed  the legal minimum to hire their workers.

Choice A: No. This choice may seem tempting due to the reference in the passage of The minimum wage employment in neighboring Pennsylvania, which did not enact a higher rate, lagged behind that of New Jersey. However, the comparison language same minimum rate indicates a possible no such comparison answer. In fact, the passage does not equate the minimum rate of pay in New Jersey with that of Pennsylvania. The passage states New Jersey enacted an increase in the state minimum wage and compares that increase to Pennsylvania, which did not enact a higher   rate.

Choice B: No. The reference to laying off minimum wage employees whose output was insufficient may seem appealing because the passage states The result is a rise in unemployment due to the elimination of jobs whose productivity falls below the new, higher productivity standard forced by the wage increase. However, this choice is a memory trap. The rise in unemployment...forced by the wage increase is mentioned in the passage as an explanation of the traditional economic theory.

Choice C: No. This answer choice uses outside knowledge to be appealing. The phrase lobbying in the answer choice is tempting to anyone with prior knowledge of how governmental policies are changed. However, the passage only mentions an increase in the state minimum wage in 1992 was followed by an increase in minimum wage employment at the higher rate.

Choice D: Correct. This answer choice is supported by the passage, as In areas of the country where demand for workers is high, employers often voluntarily exceed the legal minimum in order to recruit the workers they need.

Choice E: No. The reference to wage structure and theories of traditional economists may seem appealing because the passage discusses traditional economic theory and mentions the structure of wage differentials. However, this answer choice uses the extreme language eliminating and discredited. The passage states that employers try to maintain the structure of wage differentials and that the   theory is merely incomplete.

The correct answer is choice D.

Traditional economic theory and its partisans have long maintained

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Traditional economic theory and its partisans have long maintained

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