Economic theory supports the view that increasing the minimum wage will
A)Increase the employment of teenagers
B)Decrease the employment of teenagers
C)Decrease the employment of unionized labor
D)Increase the number of monopsony firms

Question

Quizplus · Accepted Answer

Economic theory suggests that high minimum wages lead to reduced demand for labor, particularly among low-skilled workers. This is because when employers face higher labor costs, they may cut back on hiring or reduce hours of work. Teenagers and other low-skilled workers are likely to be the most adversely affected by minimum wage increases, as they often lack the experience and skills to justify higher wages. Additionally, unionized labor is less likely to be impacted by minimum wage policies as they often negotiate wages above the minimum wage threshold. The concept of monopsony firms (where a single buyer dominates the labor market) is often used to support minimum wage increases as it can lead to increased wages for workers. However, this is not always the case and is not a direct consequence of minimum wage policies.

Economic Theory Supports the View That Increasing the Minimum Wage