Someone says, "Even though the equilibrium wage rate is $8 an hour in the unskilled labor market, if we impose a minimum wage of $10 an hour, no one currently working will lose his or her job." This person must believe that the
A)demand curve for unskilled labor is vertical.
B)demand curve for unskilled labor is downward-sloping.
C)supply curve for unskilled labor is downward-sloping.
D)supply curve for unskilled labor is horizontal.

Question

Quizplus · Accepted Answer

If the person believes that no one will lose their job despite the minimum wage being set above the equilibrium wage rate, it must mean that the demand for unskilled labor is perfectly inelastic (vertical). This is because firms are willing to pay the increased wage rate without reducing employment. If the demand curve for unskilled labor were downward-sloping, the minimum wage would lead to a reduction in employment. The supply curve of unskilled labor is not relevant to this statement.

Someone Says, "Even Though the Equilibrium Wage Rate Is $8