A minimum wage that is above the equilibrium wage rate
A) increases efficiency within the labor market.
B) increases the quantity of labor demanded.
C) creates a deadweight loss.
D) has no effect on the labor market because it is set above the equilibrium wage rate.
E) None of the above answers is correct.

Question

Quizplus · Accepted Answer

When the minimum wage is set above the equilibrium wage rate, it creates a situation where the quantity of labor supplied is greater than the quantity of labor demanded, resulting in a surplus of labor. This surplus creates a deadweight loss, as some workers who are willing to work at the lower equilibrium wage rate may not find work at the higher minimum wage rate. Therefore, option C is the correct answer. Options A and B are incorrect because the minimum wage creates inefficiencies and decreases the quantity of labor demanded. Option D is incorrect because the minimum wage rate affects the labor market by creating a surplus of labor.

A Minimum Wage That Is Above the Equilibrium Wage Rate