If a minimum wage law is passed imposing a price floor above the equilibrium price of unskilled labor and employers increasingly used efficiency wages, it would ___ structural unemployment and ____ the natural rate of unemployment:
A)Increase; increase.
B)Increase; not change.
C)Not change, increase.
D)Do none of the above.

Question

If a minimum wage law is passed imposing a price floor above the equilibrium price of unskilled labor and employers increasingly used efficiency wages, it would ___ structural unemployment and ____ the natural rate of unemployment:
A)​Increase; increase.
B)​Increase; not change.
C)​Not change, increase.
D)​Do none of the above.

Quizplus · Accepted Answer

A minimum wage law imposing a price floor above the equilibrium price of unskilled labor would make it more expensive to hire workers, leading to an increase in structural unemployment. Employers also tend to use efficiency wages to prevent shirking behavior from employees. This increases unemployment even further and raises the natural rate of unemployment.

If a Minimum Wage Law Is Passed Imposing a Price