Question

A minimum wage set above the equilibrium wage will Group of answer choices create a shortage of labor. create a surplus of labor. have no effect because the equilibrium level of employment is not affected by a minimum wage above the equilibrium wage. create a lower wage rate for skilled workers than for unskilled workers.

Answer 1

Answer:  A minimum wage set above the equilibrium wage will create a surplus of labor. The reason for this is that when the minimum wage is set about the equilibrium wage, the quantity of labor demanded will form, as firms will desire to hire less labor at higher rates. For eg if the equilibrium wage level is $10 per hour and a firm hires 2000 workers at that rate, if a minimum wage of $12 per is enforced the same firm might be willing to hire only 1800 workers at that rate and this will create a surplus of labor.

Explanation: