AICPA CPA-Business Exam - Topic 3 Question 114 Discussion

Actual exam question for AICPA's CPA-Business exam

Question #: 114
Topic #: 3

In a competitive labor market, a minimum wage that is set above the equilibrium wage will result in which of the following:

AA decrease in the quantity demanded of labor.

BAn increase in the quantity supplied of labor.

CA decrease in total employment.

DAll of the above.

Show Suggested Answer

Suggested Answer: D

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.

by Talia at Jul 08, 2025, 09:56 AM

Limited Time Offer

25%

Off

Get Premium CPA-Business Questions as Interactive Web-Based Practice Test or PDF

Contribute your Thoughts:

Submit Cancel

Jutta

7 months ago

Definitely an increase in the quantity supplied of labor!

upvoted 0 times

...

Chandra

7 months ago

Wait, so all of the above is true? That seems harsh!

upvoted 0 times

...

Alishia

7 months ago

I think it’s more complicated than that, though.

upvoted 0 times

...

Sabra

7 months ago

A decrease in the quantity demanded of labor is spot on.

upvoted 0 times

...

Karan

7 months ago

Totally agree, higher wages can lead to fewer jobs available.

upvoted 0 times

...

Joaquin

8 months ago

I’m a bit confused about the implications of minimum wage laws. I know they can create a surplus of labor, but does that automatically mean total employment decreases?

upvoted 0 times

...

Shantell

8 months ago

I feel like all of these options could be true, especially if the minimum wage is set significantly above the equilibrium. Maybe "D" is the safest choice?

upvoted 0 times

...

Jean

8 months ago

I think I saw a practice question that mentioned how higher minimum wages can increase the supply of labor, but it also makes sense that employers would hire less if they have to pay more.

upvoted 0 times

...

Gianna

8 months ago

I remember discussing how a minimum wage above equilibrium can lead to a decrease in demand for labor, but I'm not entirely sure if that means total employment will definitely drop.

upvoted 0 times

...

Nobuko

9 months ago

I think the key here is understanding how a minimum wage above equilibrium affects the labor market. If the wage is set higher, employers will demand less labor, but workers will be willing to supply more. So D, all of the above, seems like the correct choice to me.

upvoted 0 times

...

Tijuana

9 months ago

Wait, I'm confused. Isn't it just the quantity demanded that decreases with a higher minimum wage? I'm not sure about the other effects. I'll have to review my notes to make sure I understand this properly.

upvoted 0 times

...

Nickie

9 months ago

Okay, I remember learning about this in class. A minimum wage above equilibrium creates a surplus of labor, so the quantity demanded will decrease and the quantity supplied will increase, leading to a decrease in total employment. I'm pretty confident D is the right answer.

upvoted 0 times

...

Nakisha

9 months ago

Hmm, I'm a bit unsure on this one. I know a minimum wage above equilibrium causes some kind of labor market distortion, but I'm not totally clear on the specifics. I'll have to think it through carefully.

upvoted 0 times

...

Lauran

9 months ago

This one seems straightforward. I think the answer is D - all of the above. A minimum wage above the equilibrium will decrease the quantity demanded of labor and increase the quantity supplied, resulting in a decrease in total employment.

upvoted 0 times

...