Which of the following is an effect of a minimum wage law that establishes a ceiling wage below the current market clearing wage?
A)Surplus labor, or unemployment
B)A decrease in the market clearing wage
C)A decrease in the quantity of labor supplied
D)An increase in the quantity of labor supplied

Question

Quizplus · Accepted Answer

When a minimum wage law establishes a ceiling wage below the current market clearing wage, it creates a situation where there is a surplus of labor, also known as unemployment. This is because there will be more people willing to work at the higher minimum wage than there are jobs available at that wage level. As a result, some workers will be left without employment. Option B is incorrect because a minimum wage law would not decrease the market clearing wage, which is the wage at which supply and demand are in balance. Option C is also incorrect because a lower minimum wage would actually encourage more people to enter the labor market, increasing the quantity of labor supplied. Option D is incorrect because it contradicts option C, and because employers would not typically increase the quantity of labor supplied in response to a higher minimum wage.

Which of the Following Is an Effect of a Minimum