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In a competitive labor market, a minimum wage that is set above the equilibrium wage will result in which of the following:
Suggested Answer: D
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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.
14 comments · newest first
JU
Jutta
10 months ago
Definitely an increase in the quantity supplied of labor!
CH
Chandra
10 months ago
Wait, so all of the above is true? That seems harsh!
AL
Alishia
10 months ago
I think it’s more complicated than that, though.
SA
Sabra
10 months ago
A decrease in the quantity demanded of labor is spot on.
KA
Karan
10 months ago
Totally agree, higher wages can lead to fewer jobs available.
JO
Joaquin
11 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?
SH
Shantell
11 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?
JE
Jean
11 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.
GI
Gianna
11 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.
NO
Nobuko
12 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.
TI
Tijuana
12 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.
NI
Nickie
12 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.
NA
Nakisha
1 year 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.
LA
Lauran
1 year 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.