Suppose the equilibrium wage is $10 an hour.A minimum wage is a price ________ that will change the quantity of employment if it is set at ________ an hour.
A)floor;$12
B)ceiling;$12
C)floor;$8
D)ceiling;$8
E)floor;$10

Question

Quizplus · Accepted Answer

A minimum wage is a price floor that sets a wage above the equilibrium wage. If it is set at $12 an hour, it will increase the cost of labor for firms, leading to a decrease in the quantity of employment demanded. This is because firms will not want to hire as many workers at a higher wage rate. Therefore, setting the minimum wage at $12 an hour will change the quantity of employment demanded.

Suppose the Equilibrium Wage Is $10 an Hour