The minimum wage is a
A)cost ceiling.
B)positive externality.
C)price floor.
D)price ceiling.

Question

Quizplus · Accepted Answer

The minimum wage is a legal minimum price that employers must pay to their workers, which sets a floor on the wages that workers can receive. Price floors are government regulations that set a minimum price that sellers can charge for a good or service, which leads to a surplus of supply and a shortage of demand. Therefore, the minimum wage is a price floor that creates a surplus of labor (unemployment) because it increases the cost of hiring workers, and reduces the demand for labor.

The Minimum Wage Is a