If a government sets a minimum wage higher than the equilibrium wage rate, then the quantity demanded of labor _____, and the quantity supplied of labor:
A) increases; increases.
B) increases; decreases.
C) decreases; increases.
D) decreases; decreases.

Question

Quizplus · Accepted Answer

When a government sets a minimum wage above the equilibrium wage rate, employers demand less labor because the cost of hiring workers is higher, leading to a decrease in the quantity demanded of labor. Conversely, more individuals are willing to work at the higher wage, increasing the quantity supplied of labor.

If a Government Sets a Minimum Wage Higher Than the Equilibrium