Suppose the Demand for Labor Is Highly Elastic

question 393

Multiple Choice

Suppose the demand for labor is highly elastic. Which statement would BEST describe the effect of a minimum wage law that increased the wage rate by 10%?

• A) There would be a greater than 10% increase in workers hired.
• B) Firms would not substitute capital for labor.
• C) Total wages earned by workers would rise by more than 10%.
• D) Employment opportunities would drop by more than 10%.

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Definitions:

Increase

An upward movement in quantity, value, or some other measure, indicating growth or accumulation.

Income Taxed

A government levy on individual or corporate income.

Regressive Tax Structure

A tax system where the tax rate decreases as the taxable amount increases, placing a higher burden on low-income earners compared to high-income earners.

Proposal

A formal suggestion or plan put forward for consideration or discussion by others.