How would imposing a minimum wage above the market-clearing wage affect employment in a competitive labor market?
A) Employment would increase as previously unemployed workers would be more encouraged to find a job.
B) Employment would increase because a higher minimum wage would create more jobs for low-skilled workers.
C) Employment would increase as firms would illegally hire workers below the original competitive wage.
D) Employment would be unchanged as workers are nonresponsive to low wages.
E) Employment would decrease as some workers who are willing to work at the lower competitive wage would no longer be able to find work.

Question

Quizplus · Accepted Answer

Imposing a minimum wage above the market-clearing wage can lead to a surplus of labor, where the quantity of labor supplied exceeds the quantity demanded at the higher wage rate. This can result in unemployment, as employers may not be willing or able to hire as many workers at the higher wage, leading to a decrease in employment for those who would have been willing to work at the lower, market-clearing wage.

How Would Imposing a Minimum Wage Above the Market-Clearing Wage