A minimum wage
A) increases all workers' surplus because the wage rate increases.
B) increases consumer surplus because the price of the good decreases.
C) decreases the firms' surplus because fewer workers are hired at the higher wage.
D) increases the firms' surplus and the workers' surplus because it increases the efficiency of the labor market.
E) None of the above answers is correct.

Question

Quizplus · Accepted Answer

A minimum wage increases the cost of hiring workers, making it more costly for firms to hire additional workers. Therefore, fewer workers are hired, resulting in a decrease in firms' surplus. It does not necessarily increase workers' surplus as some workers may lose their jobs or work fewer hours due to the higher wage. It also does not affect consumer surplus as it does not change the price of goods. The efficiency of the labor market may increase or decrease depending on the specific impact of the minimum wage on the market.

A Minimum Wage