The equilibrium wage in a local labor market is $6 per hour.If a minimum wage of $8 per hour is imposed,which of the following will occur?
A)There will be an increase in unemployment.
B)There will be an increase in the quantity of labor demanded by firms.
C)There will be a decrease in the quantity of labor supplied by households.
D)All of the above will occur.

Question

Quizplus · Accepted Answer

When a minimum wage of $8 per hour is imposed, it is higher than the equilibrium wage of $6 per hour. This will lead to an increase in unemployment as firms will reduce the quantity of labor they demand due to the increased cost of production. Additionally, households may be willing to supply more labor at the higher wage rate, but there will be fewer job openings available, resulting in a decrease in the quantity of labor supplied. Therefore, the correct answer is A.

The Equilibrium Wage in a Local Labor Market Is $6