Question

Suppose a state passes a minimum wage law that increases the minimum wage from $5/hour to $20/hour. The equilibrium wage prior to the minimum wage hike was $10/hour.Which of the following is likely to result from the minimum wage? a. The state will experience full employment. b. Employers will demand more labor than workers will supply. c. The labor market will become more efficient. d. Some employers and workers will agree on a wage less than $20 and not report the wages to the government.

Answer 1

Answer:

D) Some employers and workers will agree on a wage less than $20 and not report the wages to the government; black market

Explanation:

The quantity supplied of labor should increase (more people will want to work), but the quantity demanded of labor should decrease (less employers will want to hire workers). Therefore the unemployment level should increase, turning the labor market less efficient.