Question

Which of the following statements are true? Check all that apply.

__ In this labor market, a minimum wage of $7.50 is binding.
__ If the minimum wage is set at $10.50, the market will not reach equilibrium.
__ In the absence of price controls, a shortage puts upward pressure on wages until they rise to the equilibrium.
__ Binding minimum wages cause frictional unemployment.

Answer 1

Suppose a bill is passed to make minimum hourly wage as $7.50, the implications would be that:

-If the minimum wage is set at $10.50, the market will not reach equilibrium.

-In the absence of price controls, a shortage puts upward pressure on wages until they rise to the equilibrium.

Therefore only the two above listed statements would be TRUE.