A minimum wage that is above the market wage will likely
A) create some unemployment.
B) increase employment opportunities.
C) cause a shortage of labor.
D) eliminate poverty.
E) increase the demand for labor.

Question

Quizplus · Accepted Answer

When the minimum wage is above the market wage, employers may not be able to afford as many employees, resulting in some unemployment. This is because the higher wage rate raises the cost of labor, possibly prompting employers to reduce their planned level of employment or to substitute capital for labor. Thus, there will be an excess supply (surplus) of labor.

A Minimum Wage That Is Above the Market Wage Will