One Way to Remove the Excess Labor Supply Problem from a Minimum

question 36

Multiple Choice

One way to remove the excess labor supply problem from a minimum wage policy is to have the government hire all unemployed workers at the minimum wage. What is the key drawback of this version of a minimum wage policy?

• A) The deadweight loss may increase substantially.
• B) The cost to the government may be very large.
• C) Consumer surplus losses increase further.
• D) A and B are correct.
• E) B and C are correct.

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Definitions:

Total Assets

This financial metric represents the sum of all resources owned by an entity, valued in monetary terms.

Current Liabilities

Obligations that a company needs to pay off within a year, including accounts payable, short-term loans, and accrued expenses.

Total Equity

The total net value of a company, calculated as total assets minus total liabilities; represents the owners' stake in the company.

Total Debt Ratio

A financial ratio that measures the extent of a company's leverage, calculated by dividing total liabilities by total assets.