Economic theory implies that when a minimum wage is set above the equilibrium wage, _____ will result.
A)lower wages
B)a shortage
C)unemployment
D)more jobs

Question

Quizplus · Accepted Answer

Economic theory suggests that when minimum wage rates are fixed above the market equilibrium, it leads to unemployment because the supply of labor increases while the demand for labor decreases. Employers are blackmailed to reduce their hiring activities, causing labor demand to decrease as the wage rate goes up, and a surplus of labor is formed (unemployment).

Economic Theory Implies That When a Minimum Wage Is Set