-A minimum wage that is above the equilibrium wage rate
A) increases efficiency within the labour market.
B) creates a deadweight loss.
C) increases the quantity of labour demanded.
D) has no effect on the labour market because it is set above the equilibrium wage rate.
E) None of the above answers is correct.

Question

-A minimum wage that is above the equilibrium wage rate
A) increases efficiency within the labour market. 
B) creates a deadweight loss. 
C) increases the quantity of labour demanded. 
D) has no effect on the labour market because it is set above the equilibrium wage rate. 
E) None of the above answers is correct.

Quizplus · Accepted Answer

A minimum wage set above the equilibrium wage rate creates a surplus of labor (unemployment) because the quantity of labor supplied by workers exceeds the quantity of labor demanded by employers at the higher wage. This mismatch creates inefficiencies in the market, known as deadweight loss, because there are workers willing to work for less than the minimum wage who cannot find jobs, and employers who would hire at lower wages but cannot due to the minimum wage law.

-A Minimum Wage That Is Above the Equilibrium Wage Rate