In a competitive labour market, a minimum wage law set above the equilibrium wage rate
A) creates a surplus of labour.
B) causes equality between the quantity of labour supplied and the quantity demanded.
C) creates a shortage of labour.
D) lowers the wage rate paid to workers.
E) has no impact.

Question

Quizplus · Accepted Answer

When a minimum wage is set above the equilibrium wage rate, it results in a surplus of labour because the higher wage attracts more workers to the market (increasing the quantity of labour supplied) while employers demand less labour at the higher wage rate, leading to unemployment or a surplus of labour.

In a Competitive Labour Market, a Minimum Wage Law Set