If the Minimum Wage Is Set Above the Market Wage

question 92

Multiple Choice

If the minimum wage is set above the market wage,

• A)the quantity of labour supplied will be below the quantity of labour demanded.
• B)unemployment will rise.
• C)highly-skilled workers will have a harder time finding jobs.
• D)frictional unemployment will increase.
• E)All of the above are correct.

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Definitions:

Average Product

The output per unit of a specific factor of production, calculated by dividing total production by the quantity of the employed factor.

Law of Diminishing Returns

An economic principle stating that if one factor of production is increased while other factors are held constant, the resulting increase in output will eventually decrease.

Fixed Input

Production factor that cannot be varied.

Technological Improvement

A process of innovation where new technologies or improvements to existing ones increase the efficiency or effectiveness of products, services, or processes.