If an increase in the government-imposed minimum wage pushes the price (wage) of unskilled labor above market equilibrium, which of the following will most likely occur in the unskilled labor market?
A) an increase in demand for unskilled labor
B) a decrease in the supply of unskilled labor
C) a shortage of unskilled labor
D) a surplus of unskilled labor

Question

Quizplus · Accepted Answer

When the government-imposed minimum wage increases, the price (wage) of unskilled labor goes above the market equilibrium. As a result, employers will reduce the quantity of unskilled labor demanded because they cannot afford to pay the higher wage. This will lead to a surplus of unskilled labor in the market because there will be more workers willing to work at the higher wage than there are available jobs at that wage. Thus, option D is the correct answer.

If an Increase in the Government-Imposed Minimum Wage Pushes the Price