Suppose that the equilibrium wage in the low- skilled labor market is $6.25 per hour. Further, suppose the federal government raises the minimum wage to $6.00 an hour from its present level of
$5.15. The government's action of increasing the minimum wage will result in:
A)a shortage of low- skilled labor.
B)an increase in unemployment.
C)a decrease in unemployment.
D)neither a shortage nor a surplus of labor in the low- skilled labor market.

Question

Quizplus · Accepted Answer

Since the new minimum wage of $6.00 is below the equilibrium wage of $6.25, it will not affect the labor market, resulting in neither a shortage nor a surplus of labor.

Suppose That the Equilibrium Wage in the Low- Skilled Labor