(Figure: Labor Market 3 Refer to the figure. In the diagram, a minimum wage of $7 causes a deadweight loss of:

Question

(Figure: Labor Market 3  Refer to the figure. In the diagram, a minimum wage of $7 causes a deadweight loss of:

Quizplus · Accepted Answer

In the diagram, a minimum wage of $7 causes a deadweight loss equal to the area X + Z. Therefore, the correct choice is B. A minimum wage causes a deadweight loss because it increases the wage rate above the equilibrium level, leading to a reduction in the quantity of labor demanded by firms and an increase in the quantity of labor supplied by workers. The resulting excess supply of labor represents a net loss to society in terms of foregone gains from trade.

(Figure: Labor Market 3 Refer to the Figure