ECONOMICS
MARKETS AND PRICES
|
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
|
|
|
Firms try to break the law and hire people at equilibrium
|
|
|
Firms employ more workers than they would at equilibrium
|
|
|
Firms employ fewer workers than they would at equilibrium
|
|
|
Firms hire more workers for fewer hours
|
Detailed explanation-1: -In a competitive labor market model, a minimum wage set above equilibrium causes a decrease in firms’ labor demand and displaces some workers from their jobs, thereby generating unemployment.
Detailed explanation-2: -Answer and Explanation: When the government sets the minimum wage above the equilibrium wage, it creates unemployment in the market. Besides, the higher minimum wage will create a disparity between the labor demanded and labor supplied. For instance, employers will require reduced labor due to the higher minimum wage.
Detailed explanation-3: -When the minimum wage is above the equilibrium wage rate than its causes a surplus of labor in the market. Thus, at this surplus of labor, the quantity demanded of labor in the market is less than the quantity supplied.
Detailed explanation-4: -If wages are below the equilibrium level, there is a shortage of labor and wages get bid up; if wages are above the equilibrium level, there is a surplus and wages get bid down. We move along both the labor supply and labor demand curves.
Detailed explanation-5: -The figure below illustrates a situation where the current real wage is higher than the equilibrium real wage. At w0 the supply of labor, NS0 is greater than the demand for labor, ND0, and so there is an excess supply of labor in the labor market.