Suppose the current equilibrium wage rate for lifeguards in Sydney is $7.85 an hour. A minimum wage law that creates a price floor of $8.50 an hour leads to
A) no changes in the lifeguard market.
B) a shortage of lifeguards in Sydney.
C) an increase in the number of lifeguards employed.
D) a change in the quantity of lifeguards supplied but no change in the quantity of lifeguards demanded.
E) a surplus of lifeguards in Sydney.

Question

Quizplus · Accepted Answer

The price floor set by the minimum wage law is above the equilibrium wage rate, which means it will create a surplus of lifeguards as more people will be willing to supply their labor at the higher wage rate, and fewer employers would be willing to employ them at the higher wage rate, leading to a surplus of lifeguards in Sydney.

Suppose the Current Equilibrium Wage Rate for Lifeguards in Sydney