If the Equilibrium Wage in a Competitive Labour Market Is

question 111

Multiple Choice

If the equilibrium wage in a competitive labour market is $9 per hour,and the government raises the minimum wage from $7 to $8 per hour,what will be the effect in this market?

• A)the level of employment will decrease
• B)unemployment will increase
• C)unemployment will decrease
• D)there will be no effect on employment
• E)the average wage paid to workers will increase

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Definitions:

Classical Model

An economic theory that suggests markets function best with minimal government intervention and that supply and demand are the primary forces driving the economy.

Self-Regulating Market

A market mechanism in which market forces such as supply and demand are allowed to operate freely without external intervention, theoretically leading to efficient outcomes.

Say's Law

An economic theory that proposes supply creates its own demand, meaning production inherently creates the consumption of equivalent value.

Aggregate Supply Curve

This represents the total supply of goods and services that firms in an economy are willing to sell at a given price level during a specified time period.