Suppose a Minimum Wage of $4 an Hour Is in Force

question 107

Multiple Choice

Suppose a minimum wage of $4 an hour is in force, resulting in unemployment of 10 million hours. Then the demand for labour increases such that supply and demand curves intersect at a wage rate of $5 per hour. What will happen to the equilibrium wage rate and employment?

• A)The wage rate is $5 an hour and there will be no unemployment.
• B)The wage rate is $5 an hour and there will be a surplus of labour.
• C)The wage rate is $4 an hour and there will be a surplus of labour.
• D)The wage rate is $4 an hour and there will be no unemployment.
• E)The wage rate is $4 an hour and there will be unemployment.

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