If the minimum wage law sets a price floor above the equilibrium wage in the market for unskilled labor, then which of the following statements would likely occur?
A) The minimum wage will create a shortage of unskilled labor.
B) The unskilled labor market will change, but we can't be certain how.
C) The minimum wage will not impact the unskilled labor market.
D) The minimum wage will create a surplus of unskilled labor.
A price floor is a permissible lowest price at which a product can be traded. For the price floor to be effective, it must be set above the equilibrium price. When it is set below the equilibrium price, it will have no influence on the market.
Answer and Explanation: 1
- The answer to this question is D) The minimum wage will create a surplus of unskilled labor.
The figure below represents the unskilled labor market...
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fromChapter 6 / Lesson 6
Understand the effect of minimum wage on employment. Study wage employment graphs and how they work, and discover pros and cons of minimum wage increase effects.