Minimum wages create unemployment in markets where they create a

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BlackTom AI · Accepted Answer

The question asks about the effect of minimum wages on employment in markets where they create a certain condition, and it names the type of unemployment associated with that condition.
Option 1: 'shortage of labor. Unemployment of this type is called structural.' A shortage of labor would imply there are not enough workers to fill jobs, which is not the typical result of a binding minimum wage. Structural unemployment refers to mismatches between skills or locations and available jobs, not to a labor shortage caused by wage floors. So this pairing is incorrect.
Option 2: 'surplus of labor. Unemployment of this type is called frictional.' A surplus of labor means there are more workers than jobs, but frictional unemployment is usually short-term and arises from the job search process, not from a wage floor that creates a persistent surplus. This mislabels both the condition and the type of unemployment, making it incorrect.
Option 3: 'shortage of labor. Unemployment of this type is called frictional.' This combines a labor shortage with frictional unemployment. Frictional unemployment indeed reflects normal turnover and short-term job search, not a shortage due to wage floors. The pairing is inconsistent, so this option is false.
Option 4: 'surplus of labor. Unemployment of this type is called structural.' This aligns with standard economic theory: a binding minimum wage above the market-clearing wage tends to create excess supply of labor (more people willing to work at the higher wage than there are jobs available), which is structural unemployment since it reflects a persistent mismatch between workers and job opportunities caused by the policy. This option correctly identifies both the surplus of labor and the correct name for the unemployment type that results from a wage floor.

Minimum wages create unemployment in markets where they create a

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Minimum wages create unemployment in markets where they create a

View Explanation

Log in for full answers

Similar Questions

Labor Market Data Below is some hypothetical data on the labor market. Refer to Labor Market Data. If the government imposed a minimum wage of $7, what would unemployment be?

In the diagram below, the economy is initially at point A. A binding minimum real wage (w) is introduced above the equilibrium wage. Which point represents actual employment?

Part 1What is the effect of a minimum wage set above the equilibrium wage​ rate? Part 1When a minimum wage is set above the equilibrium wage​ rate, _______. A. unemployment decreases B. the supply of workers decreases C. job search activity decreases D. unemployment increases

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Part 1What is the effect of a minimum wage set above the equilibrium wage rate? Part 1When a minimum wage is set above the equilibrium wage rate, _______. A. unemployment decreases B. the supply of workers decreases C. job search activity decreases D. unemployment increases