Minimum-wage legislation is less likely to have adverse effects on employment when the
A) affected labor market is monopsonistic.
B) economy has high unemployment.
C) derived demand for labor is shifting to the left.
D) demand for labor is relatively elastic.

Question

Quizplus · Accepted Answer

Minimum-wage legislation is more likely to have adverse effects on employment when the labor market is perfectly competitive because firms cannot adjust their prices to offset the increased cost of wages. In a monopsonistic labor market, employers have some degree of market power, so they may be able to pass on some of the increased cost to consumers. Therefore, minimum-wage legislation is less likely to have adverse effects on employment in a monopsonistic labor market.

Minimum-Wage Legislation Is Less Likely to Have Adverse Effects on Employment