Figure 5.2. The figure shows the supply and demand curves of a firm.
-Which of the following is a possible outcome of a minimum wage imposed by a government?
A)It leads to an increase in consumer surplus.
B)It favors women and children and helps improve their standard of living.
C)It eradicates the problem of unemployment from the market.
D)It creates a labor surplus or unemployment.
E)It creates a labor deficit.

Question

​Figure 5.2. The figure shows the supply and demand curves of a firm. 
-Which of the following is a possible outcome of a minimum wage imposed by a government?​
A)​It leads to an increase in consumer surplus. 
B)​It favors women and children and helps improve their standard of living. 
C)​It eradicates the problem of unemployment from the market. 
D)​It creates a labor surplus or unemployment. 
E)​It creates a labor deficit.

Quizplus · Accepted Answer

Imposing a minimum wage creates a price floor in the labor market. If the minimum wage is set above the equilibrium wage, it creates a labor surplus, meaning there are more workers willing to work than the number of jobs available, resulting in unemployment. Therefore, option D is the correct answer. Option A is incorrect because a minimum wage would not increase consumer surplus. Option B may be true in some cases, but it is not a direct outcome of a minimum wage. Option C is incorrect because a minimum wage cannot eradicate unemployment from the market. Option E is also incorrect because a minimum wage cannot create a labor deficit.

​Figure 52

Figure 52