If there is a floor on wages created by a minimum wage, union contracts, or other factors, then a decline in the marginal productivity of low-skilled workers will ________ the demand for low-skilled workers and ________ the number of unemployed workers.
A)increase; increase
B)increase; decrease
C)decrease; decrease
D)decrease; increase

Question

Quizplus · Accepted Answer

Declining marginal productivity of low-skilled workers makes them less desirable and decreases the demand for them. The market price cannot react due to the wage floor so the result is higher unemployment.

If There Is a Floor on Wages Created by a Minimum