If the labor market is competitive and coverage is complete,then legislation to enact a minimum wage above the equilibrium wage level would
A) increase both wages and employment.
B) decrease both wages and employment.
C) decrease wages and increase employment.
D) increase wages and decrease employment.

Question

Quizplus · Accepted Answer

If the legislated minimum wage is set above the equilibrium wage level, the resulting wage floor will cause an excess supply of labor (unemployment), as more workers will want to work at the higher wage rate than will be hired by employers. Therefore, the legislation will lead to an increase in wages for those who remain employed, but also to a decrease in employment.

If the Labor Market Is Competitive and Coverage Is Complete,then