Discuss AICPA CPA-Business Exam Topic 3 Question 119

In a competitive market an increase in the minimum wage will likely have the following effects:

AThe general (or aggregate) demand for labor will increase; however, the quantity demanded will remain unchanged.

BThe general (or aggregate) supply of labor will increase; however, the quantity supplied will remain unchanged.

CThe general (or aggregate) demand for labor will remain unchanged; however, the quantity demanded will decrease.

DThe general (or aggregate) supply of labor will remain unchanged; however, the quantity supplied will decrease.

Suggested Answer: C

Choice 'c' is correct. The general (or aggregate) demand for labor will remain unchanged; however, the quantity demanded will decrease.

Choice 'a' is incorrect, per Explanation: for choice 'c' above.

Choices 'b' and 'd' are incorrect. The general (or aggregate) supply of labor will remain unchanged; however, the quantity supplied will increase.

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32 comments · newest first

Jesusa 6 months ago

D could happen too. If wages rise, some might not want to work at all.

Juliann 6 months ago

I lean towards B. More people would supply labor with higher wages.

Deonna 6 months ago

True, but A says demand increases, which feels off to me.

Kristin 6 months ago

But what about A? More people might want jobs if wages rise.

Gabriele 6 months ago

I agree, C seems right. Employers might hire fewer workers.

Nida 6 months ago

Totally agree with A), more demand for labor is expected!

Helga 7 months ago

D) is unlikely, supply usually increases with higher wages.

Marg 7 months ago

Surprised to see B) listed, isn't that counterintuitive?

Darrin 7 months ago

A) makes sense, higher wages attract more workers.

Werner 8 months ago

Haha, this question is a piece of cake. C is the way to go, my friends.

Wei 8 months ago

C) The answer is C. Unless you're living under a rock, this is basic stuff.

Lon 8 months ago

The answer is C, duh. Anyone who's taken Econ 101 knows that.

Albina 8 months ago

C) The correct answer is C. Minimum wage increases reduce the quantity of labor demanded, but don't affect the overall demand.

Caitlin 8 months ago

Hmm, I'm torn between B and C. But I think C makes the most sense.

Aleta 8 months ago

This is a classic economics question. I'm pretty sure the answer is C.

Elfrieda 9 months ago

C) The general (or aggregate) demand for labor will remain unchanged; however, the quantity demanded will decrease.

Gene 9 months ago

I feel like the supply of labor would increase with higher wages, but I'm not clear on how that impacts the quantity supplied.

Renay 9 months ago

If I remember correctly, higher minimum wage could lead to a decrease in quantity demanded, but I'm confused about how that affects overall demand.

Gary 9 months ago

I think we practiced a question similar to this where the demand for labor decreased with higher wages, but I can't recall the exact reasoning behind it.

Larae 9 months ago

I'm feeling pretty confident about this one. The key is understanding that the minimum wage affects the supply and demand curves differently. I'll work through it step-by-step.

Rodolfo 9 months ago

I've got this! An increase in the minimum wage will decrease the quantity of labor demanded, so the answer is C. Easy peasy.

Darnell 10 months ago

Hmm, this is tricky. I'm a little confused about the difference between "general/aggregate" and "quantity" in the answer choices. I'll have to re-read the question closely.

Timothy 10 months ago

I think option C makes sense. Higher wages might reduce demand for labor.

Charisse 10 months ago

I disagree, C) seems more accurate, demand will drop.

Nu 10 months ago

I remember discussing how an increase in minimum wage might lead to higher labor supply, but I'm not sure if that means demand stays the same.

Lucina 11 months ago

Okay, this looks like a classic supply and demand question. I just need to remember how an increase in the minimum wage affects the labor market.

Gearldine 11 months ago

I think I know the basic concepts here, but I'm not totally sure how to apply them to this specific question. I'll need to think it through carefully.

Jacquelyne 4 months ago

↳ replying to Gearldine

True, but if wages rise, wouldn’t that attract more workers overall?

Dottie 5 months ago

↳ replying to Gearldine

I’m leaning towards option D. Higher wages might scare off some employers.

Shaniqua 5 months ago

↳ replying to Gearldine

Exactly! So maybe option C is right. Demand could drop if businesses can't afford it.

Argelia 5 months ago

↳ replying to Gearldine

But wouldn’t that just mean more competition for the same jobs?

Carman 10 months ago

↳ replying to Gearldine

I feel like option A makes sense. More people might want jobs if wages go up.

AICPA CPA-Business Exam - Topic 3 Question 119 Discussion