Question

Minimum-wage laws can keep wagesa.a) above equilibrium and cause a surplus of labor.b) above equilibrium and cause a shortage of labor.c) below equilibrium and cause a surplus of labor.d) below equilibrium and cause a shortage of labor.

Answer 1

Answer:

The correct answer is option a.

Explanation:

Minimum wages can be defined as the minimum level of wages that an employer is supposed to pay to workers for their work. It cannot be reduced through an individual contract or collective agreement.  

Minimum wages are fixed above the equilibrium level of wages. At this level, the demand for labor is lower while supply is more because of high wages. This creates surplus labor in the market.