When the market wage is higher than the equilibrium wage in an economy, _____.
A)there is excess demand for labor
B)there is unemployment
C)the economy produces at full employment level
D)the labor supply curve shifts to the left
E)the labor demand curve shifts to the right

Question

Quizplus · Accepted Answer

When the market wage is higher than the equilibrium wage, it means that the wage rate is above the level where labor demand and labor supply are equal. This leads to excess supply of labor, or unemployment, as firms are not willing to hire all the workers who are willing to work at that higher wage rate. Therefore, choice B is the correct answer.

When the Market Wage Is Higher Than the Equilibrium Wage