An increase in the minimum wage imposed by the government causes an increase in unemployment because:
A)the labor supply curves are backward-bending.
B)the demand curves for labor are downward-sloping.
C)leisure is a normal good.
D)the increase in the wage rate reduces the price of leisure.

Question

Quizplus · Accepted Answer

When the government increases the minimum wage, it increases the cost of labor for employers, leading to a decrease in demand for labor. This, in turn, leads to an increase in unemployment as some workers become unable to find jobs at the higher wage rate. While the other options may have some impact on the labor market, they are not relevant to the specific effect of a minimum wage increase on unemployment.

An Increase in the Minimum Wage Imposed by the Government