If a minimum wage is set above the free- market equilibrium wage in a competitive labour market, the labour market will experience an increase in wages and

Question

Quizplus · Accepted Answer

When a minimum wage is set above the free-market equilibrium wage, employers will face higher costs of hiring workers, which could lead to a decrease in demand for labour. This could lead to a decrease in employment as some employers might not be able to afford the higher wage rates and may have to reduce their workforce. Therefore, the correct choice is C, employment will decrease. This is a well-established phenomenon known as the disemployment effect of minimum wages.

If a Minimum Wage Is Set Above the Free- Market