A minimum wage law in a competitive labor market
A)creates a shortage of labor.
B)causes equality between the quantity of labor supplied and the quantity demanded.
C)creates a surplus of labor.
D)lowers the wage rate paid to workers.
E)has an impact only if it is set below the equilibrium wage rate.

Question

Quizplus · Accepted Answer

A minimum wage law above the equilibrium wage rate creates a surplus of labor because it increases the quantity of labor supplied by workers while decreasing the quantity of labor demanded by employers. Employers face higher costs, causing them to reduce their demand for workers, resulting in a surplus of labor.

A Minimum Wage Law in a Competitive Labor Market