When the real wage is above the level that equilibrates supply and demand:
A) the quantity of labor supplied exceeds the quantity demanded.
B) the quantity of labor demanded exceeds the quantity supplied.
C) there is no unemployment.
D) the labor market clears.

Question

Quizplus · Accepted Answer

When the real wage is above the level that equilibrates supply and demand, it means that the wage rate is higher than the market-clearing wage rate. This will cause an excess supply of labor, which means that the quantity of labor supplied exceeds the quantity demanded. As a result, there will be unemployment in the labor market. Therefore, choice A is correct. Choices B, C, and D are incorrect because they do not accurately describe the situation when the real wage is above the equilibrium level.

When the Real Wage Is Above the Level That Equilibrates