In the competitive model where all workers are covered by the minimum wage and all firms comply with the law,a minimum wage set above the competitive equilibrium wage will ______ employment and ______ unemployment.
A) increase;increase
B) not affect;decrease
C) decrease;increase
D) decrease;decrease
E) not affect;increase

Question

Quizplus · Accepted Answer

Setting a minimum wage above the competitive equilibrium wage will increase the wage paid to workers, making it more expensive for firms to hire workers,resulting in a decrease in employment. As a result, some workers will lose their jobs or fail to find work, which will increase unemployment.

In the Competitive Model Where All Workers Are Covered by the Minimum