A number of states have a minimum wage that is higher than the federal minimum. In those states that impose such a minimum wage, it is more likely that the minimum wage acts as a binding:
A) price floor, causing excess supply in the market.
B) price floor, causing excess demand in the market.
C) price ceiling, causing excess supply in the market.
D) price ceiling, causing excess demand in the market.

Question

Quizplus · Accepted Answer

A minimum wage set above the equilibrium wage acts as a binding price floor, leading to excess supply (unemployment) as employers hire fewer workers at the higher wage.

A Number of States Have a Minimum Wage That Is