AICPA Exam CPA-Business Topic 3 Question 114 Discussion

Choice 'd' is correct. As illustrated in the graph, a minimum wage that is set above the equilibrium wage results in a decrease in the quantity demanded of labor (falls to LD), an increase in the quantity supplied of labor (increases to LS), and a decrease in total employment (total employment falls from L* to LD).

Choices 'a', 'b', and 'c' are incorrect. All are true, making choice 'd' the only right answer.