FIGURE 14-5
-Refer to Figure 14-5. Suppose this labour market is perfectly competitive. If a minimum wage of W1 is then imposed, the quantity of labour hired would be

Question

Quizplus · Accepted Answer

When a minimum wage of W1 is imposed, the wage rate becomes higher than the equilibrium wage rate (W0) and firms reduce the quantity of labour demanded from Q2 to Q3. Therefore, the quantity of labour hired would be Q3. This is because at a higher wage rate, the marginal cost of labour exceeds the marginal benefit of labour, reducing the demand for labour.

FIGURE 14-5 -Refer to Figure 14-5. Suppose This Labour Market Is Perfectly