If the minimum wage is above the equilibrium wage rate,then an increase in the minimum wage ________ employment and ________ unemployment.
A) increases; increases
B) increases; decreases
C) decreases; increases
D) decreases; decreases
E) does not change; increases

Question

Quizplus · Accepted Answer

When the minimum wage is above the equilibrium wage rate, it creates a surplus of laborers (those willing to work but unable to find a job) and a shortage of jobs available. An increase in the minimum wage would make it even more expensive to hire workers, encouraging employers to hire fewer workers, therefore decreasing employment and increasing unemployment.

If the Minimum Wage Is Above the Equilibrium Wage Rate,then