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

BlackTom AI · Accepted Answer

Question restatement: What is the effect of a minimum wage set above the equilibrium wage rate?

Option A: unemployment decreases. This is not correct because when the minimum wage is above the market-clearing wage, there is a surplus of labor: more workers are willing to work at that higher wage than there are jobs available. That surplus translates into higher, not lower, unemployment.

Option B: the supply of workers decreases. This misstates the mechanism. In a typical labor-market graph, a higher wage induces more people to enter the labor force or seek jobs, so the quantity supplied of labor increases, not decreases. So this option contradicts standard supply behavior in response to higher wages.

Option C: job search activity decreases. On the contrary, when unemployment rises due to an above-equilibrium minimum wage, many workers intensify job search to find positions at or above the mandated rate. Therefore, this option understates the impact and is incorrect.

Option D: unemployment increases. This matches the core result of setting a binding minimum wage above the equilibrium: a surplus of labor, i.e., more people want jobs than there are vacancies, leading to higher unemployment. The logic is that the higher wage creates a wedge between what firms are willing to pay and the wage workers demand, reducing the number of hires relative to the number of applicants.

Homework:ch6_homework

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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Homework:ch6_homework

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

View Explanation

Log in for full answers

Similar Questions

Minimum wages create unemployment in markets where they create a

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?

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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