How Would Imposing a Minimum Wage Above the Market-Clearing Wage

question 5

Multiple Choice

How would imposing a minimum wage above the market-clearing wage affect employment in a competitive labor market?

• A) Employment would increase as previously unemployed workers would be more encouraged to find a job.
• B) Employment would increase because a higher minimum wage would create more jobs for low-skilled workers.
• C) Employment would increase as firms would illegally hire workers below the original competitive wage.
• D) Employment would be unchanged as workers are nonresponsive to low wages.
• E) Employment would decrease as some workers who are willing to work at the lower competitive wage would no longer be able to find work.

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Definitions:

Liabilities

Financial obligations or debts that a company owes to others, which must be settled over time through the transfer of economic benefits including money, goods, or services.

Contingent Liabilities

Contingent liabilities are potential liabilities that may occur depending on the outcome of a future event.

Account

A record in bookkeeping that tracks financial transactions of a specific type, such as assets, liabilities, expenses, or revenue.

FUTA

The Federal Unemployment Tax Act, a United States federal law that imposes a payroll tax on businesses to fund state workforce agencies.