Minimum wage laws often block transactions between employers and workers that would otherwise occur at wage rates below the minimum.As a result,minimum wage laws tend to
A) improve equity at the expense of efficiency.
B) improve efficiency at the expense of equity.
C) improve both equity and efficiency.
D) reduce both equity and efficiency.

Question

Quizplus · Accepted Answer

Minimum wage laws create a price floor for potential workers, meaning employers are not legally allowed to pay workers below the set minimum wage. This can lead to some workers being unable to find jobs, as their labor may not be valued at the minimum wage rate or higher. This reduces efficiency in the labor market. However, it can also help to reduce income inequality and poverty by ensuring workers receive a livable wage, improving equity. Therefore, minimum wage laws improve equity at the expense of efficiency.

Minimum Wage Laws Often Block Transactions Between Employers and Workers