An Effective Minimum Wage

question 189

Multiple Choice

An effective minimum wage

• A) imposes a price ceiling on the wages of various categories of low-skill workers.
• B) increases the demand for low-skill workers.
• C) makes it easier for low skill workers to find jobs.
• D) increases the earnings of some low-skill workers while reducing the employment and training opportunities available to others.

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Definitions:

Purely Competitive Market

A market structure characterized by a large number of small firms, a homogeneous product, free entry and exit, and perfect information, leading to firms being price takers.

Short Run

A time period in which at least one factor of production is fixed, limiting the ability of a firm to adjust its output.

Automatic Market Adjustments

The self-regulating nature of the marketplace that responds to supply and demand changes to reach equilibrium without outside intervention.

Long-run Equilibrium

A state in which, given enough time for all adjustments to be made, there is no incentive for firms to enter or exit an industry, and prices stabilize.