The minimum wage,which sets a lower limit on the wages that workers can earn,is often above the equilibrium price.The minimum wage is an example of a(n):
A)price floor.
B)price ceiling.
C)quota.
D)equilibrium price.

Question

Quizplus · Accepted Answer

The minimum wage is a government-mandated price floor that is set above the equilibrium price in the labor market. This leads to a situation where there is excess supply of labor (unemployment) because the quantity of labor supplied exceeds the quantity of labor demanded at the higher wage rate.

The Minimum Wage,which Sets a Lower Limit on the Wages