A Minimum Wage That Is Set Below a Market's Equilibrium

question 116

Multiple Choice

A minimum wage that is set below a market's equilibrium wage will

• A)result in an excess demand for labor,that is,unemployment.
• B)result in an excess demand for labor,that is,a shortage of workers.
• C)result in an excess supply of labor,that is,unemployment.
• D)have no impact on employment.

---

Definitions:

Fixed Costs

Expenses that do not change with the level of production or sales activities, within a relevant period.

Variable Cost

Costs that vary in total in direct proportion to changes in the level of activity or volume of production.

Operating Leverage

The degree to which a firm or project can increase operating income by increasing revenue, reflecting the proportion of fixed costs to variable costs.

Financial Leverage

The use of borrowed funds to increase the potential return of an investment, which can also increase the risk of loss.