ECONOMICS
MARKETS AND PRICES
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Firms try to break the law and hire people at equilibrium
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Firms employ more workers than they would at equilibrium
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Firms employ fewer workers than they would at equilibrium
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Firms hire more workers for fewer hours
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Detailed explanation-1: -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-2: -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-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: -According to the Efficiency Wage Theory, firms can operate more efficiently and become more productive if they pay wages above the equilibrium level.