Figure 5.3. The figure shows the wage rate and the quantity of labor supplied in an unskilled labor market. -Refer to figure 5.3. Suppose the government imposes a minimum wage of $8. Which of the following is a possible outcome of the imposition of a minimum wage above the equilibrium wage rate? A)There will be a rightward shift in the labor supply curve. B)There will be a rightward shift in the labor demand curve. C)There will be an increase in the quantity of jobs offered, from Q to Q_II, and a fall in the quantity of labor supplied, from Q to Q_I. D)There will be a fall in the quantity of jobs offered, from Q to Q_I, and an increase in the quantity of labor supplied, from Q to Q_II. E)There will be an increase in the producer surplus, at the minimum wage rate.

Question

Quizplus · Accepted Answer

When the government imposes a minimum wage of $8, it creates a situation where the wage rate is fixed above the equilibrium wage rate. As a result, the quantity of labor supplied will increase while the quantity of jobs offered will decrease. This is because more people will want to work at the higher wage rate, while fewer employers will be willing to hire at the higher wage rate. Thus, the equilibrium point shifts from Q to the intersection of supply curve S1U1B1I and demand curve D1. This leads to a fall in the quantity of jobs offered and an increase in the quantity of labor supplied, resulting in a decrease in overall employment. Therefore, option D is the correct choice. Option A is incorrect because there will be no rightward shift in the labor supply curve. Option B is incorrect because there will be no rightward shift in the labor demand curve. Option C is incorrect because it implies an increase in both the quantity of jobs offered and the quantity of labor supplied, which is not possible given the imposition of a minimum wage. Option E is incorrect because the producer surplus will decrease due to the increase in the wage rate.

​Figure 53

Figure 53