If the elasticity of labor demand is greater than one, then imposing a minimum wage above the equilibrium wage will cause:
A)the firms' total wage bill to fall.
B)employment to rise.
C)the firms' total wage bill to rise.
D)no adverse employment effects.

Question

Quizplus · Accepted Answer

If the demand for labor is elastic, then a 1 percent increase in the wage rate will result in a more than 1 percent decrease in employment, so firms' total wage bill will fall.

If the Elasticity of Labor Demand Is Greater Than One