-If the minimum wage is set above the equilibrium wage, after taking into account the resources lost in job search, the firms' surplus ________ and the workers' surplus ________.
A) decreases; decreases
B) increases; decreases.
C) increases; increases
D) does not change; decreases
E) decreases; increases

Question

-If the minimum wage is set above the equilibrium wage, after taking into account the resources lost in job search, the firms' surplus ________ and the workers' surplus ________.
A) decreases; decreases 
B) increases; decreases. 
C) increases; increases 
D) does not change; decreases 
E) decreases; increases

Quizplus · Accepted Answer

When the minimum wage is set above the equilibrium wage, firms' surplus decreases because they have to pay more for labor than they would at the equilibrium wage. Workers' surplus also decreases overall because, despite higher wages for those employed, more workers will be unemployed or will spend resources on job searches due to the higher wage causing a surplus of labor (more people willing to work at the higher wage than there are jobs available).

-If the Minimum Wage Is Set Above the Equilibrium Wage