When a minimum-wage law forces the wage to remain above the level that balances supply and demand, it
A)raises the quantity of labor supplied and raises the quantity of labor demanded compared to the equilibrium level.
B)raises the quantity of labor supplied and reduces the quantity of labor demanded compared to the equilibrium level.
C)reduces the quantity of labor supplied and raises the quantity of labor demanded compared to the equilibrium level.
D)reduces the quantity of labor supplied and reduces the quantity of labor demanded compared to the equilibrium level.

Question

Quizplus · Accepted Answer

When the minimum-wage law raises the wage above the equilibrium level, it creates a surplus of labor (i.e. more people willing to work at that wage than there are jobs available) which reduces the quantity of labor demanded by employers. At the same time, it increases the quantity of labor supplied by workers who are now willing to work at that higher wage. Therefore, there is a decrease in the quantity of labor demanded and an increase in the quantity of labor supplied, resulting in an excess supply of labor, or unemployment.

When a Minimum-Wage Law Forces the Wage to Remain Above