Figure 20-5
-Refer to Figure 20-5. If the government imposes a minimum wage above W_o, it is likely to

Question

Figure 20-5 -Refer to Figure 20-5. If the government imposes a minimum wage above W_o, it is likely to

Quizplus · Accepted Answer

When the government imposes a minimum wage above the equilibrium wage (W_o), it creates a surplus of labor (unemployment). Employers are willing to hire fewer workers at a higher wage rate, and workers are willing to supply more labor at the higher wage rate, resulting in a surplus of labor. Therefore, the government-imposed minimum wage is likely to reduce employment to a level below Q_o. Choice A is incorrect because it suggests that employment would increase, which is not true. Choice C is incorrect because even though the working poor may receive higher wages due to the minimum wage, the majority of them are likely to lose their jobs. Choice D is also incorrect because the imposition of a minimum wage has a real economic impact on employment.

Figure 20-5 -Refer to Figure 20-5. If the Government Imposes a Minimum