Critics contend that imposing a minimum wage higher than the equilibrium wage in a competitive industry would
A) decrease the number of workers employed in that industry.
B) decrease the quantity of labor supplied to that industry.
C) increase the demand for labor in the industry.
D) increase employment in that industry.

Question

Quizplus · Accepted Answer

When a minimum wage is imposed higher than the equilibrium wage in a competitive industry, it sets a price floor, meaning that the wage cannot drop below this level. This causes employers to reduce the number of workers employed in the industry as they cannot afford to pay all of their workers the higher minimum wage. Therefore, the correct choice is A. B is incorrect because the quantity of labor supplied would likely increase since workers would want to work for the higher wage. C and D are both incorrect because a higher minimum wage would not directly increase the demand or employment in the industry.

Critics Contend That Imposing a Minimum Wage Higher Than the Equilibrium