Minimum Wage Legislation by the Government Would

question 32

Multiple Choice

Minimum wage legislation by the government would:

• A)create labor shortage.
• B)create labor surplus.
• C)not affect the labor market.
• D)benefit the firms.
• E)increase income inequality in the country.

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Definitions:

Competitive Firm

A company that operates in a market where there are many buyers and sellers, and no single entity can control the prices.

Purely Competitive

An ideal market scenario where there are many sellers and buyers, each small relative to the market, products are homogeneous, and there is free entry and exit from the market.

Producer Surplus

The divergence between the anticipated payment by producers for a good or service and the actual financial return they obtain.

Allocative Efficiency

An economic state where resources are distributed in a way that maximizes the net benefit to society, ensuring that every good or service is produced up to the point where the last unit provides a benefit to consumers exactly equal to the cost of producing it.