Figure 28-1
-Refer to Figure 28-1. If there was no minimum wage and then the government instituted a minimum wage of $6, what would happen to employment in this market?

Question

Figure 28-1 
-Refer to Figure 28-1. If there was no minimum wage and then the government instituted a minimum wage of $6, what would happen to employment in this market?

Quizplus · Accepted Answer

According to the graph, the equilibrium wage rate without a minimum wage is $5 and the equilibrium employment level is 90. However, if the government institutes a minimum wage of $6, the wage rate will be pushed above the equilibrium level, leading to a decrease in the quantity demanded of labor and an increase in the quantity supplied of labor. As a result, there will be a surplus of labor (i.e., unemployment) equal to the difference between the quantity supplied and the quantity demanded, which is 20 in this case. Therefore, D is the correct answer.

Figure 28-1 -Refer to Figure 28-1. If There Was No Minimum Wage