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As a firm's labor costs rise, the firm should mitigate the cost increase by substituting away...

Question:

As a firm's labor costs rise, the firm should mitigate the cost increase by substituting away from labor. What does this mean, in regard to increase in minimum wages?

Minimum Wage:

Minimum wage is a type of price floor, and is often used as a policy tool to improve earnings of low-income workers. Many economists argue that minimum wage instead reduces employment.

Answer and Explanation: 1

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This means that minimum wage will likely lead to reduced employment. This the market forces work in a way to reduce the efficiency of minimum wage,...

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What is a Minimum Wage? - Definition & History

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Chapter 7 / Lesson 12
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Understand the minimum wage definition in economics. Discover the history of minimum wage in the U.S., and explore the advantages and disadvantages of imposing a minimum wage. Learn the difference between federal and state minimum wage.


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