Question

The effects of an effective minimum wage, where the minimum wage is set above the

equilibrium wage rate, are to
employment.
the wage rate paid workers and
A) raise; increase
B) raise; decrease
C) lower; decrease
D) lower; increase
E) raise; not change

Answer 1

An effective minimum wage, set above the equilibrium wage rate, will lower the wage rate paid to workers and decrease employment.

Step-by-step explanation:

The effects of an effective minimum wage, set above the equilibrium wage rate, are to lower the wage rate paid to workers and decrease employment.

When the minimum wage is set above the equilibrium wage rate, it creates an excess supply of labor because employers are willing to hire fewer workers at the higher wage. This reduces employment opportunities in the labor market.

For example, if the minimum wage is set at $10 per hour but the equilibrium wage rate is $8 per hour, employers would be less willing to hire as many workers at the higher wage, resulting in lower employment levels.