Question

Simpsons Buffalo Wings is in a perfectly competitive market when the government imposes a minimum wage, above the equilibrium wage. As a result, a.the quantity of labor supplied increases. b.the output reduces. c.the quantity of labor demanded increases. d.he price of unit output increases. ethe price of unit output decreases.

Answer 1

The correct answer is (a)

Step-by-step explanation:

Increase in wages increases the overall supply of labour. In the above scenario, the government has imposed minimum wage which is above the equilibrium wage this will lead to an increase in labour supply. The main reason behind the increase in the supply of labour is that the minimum wage is now above the equilibrium wage. This might create a surplus of labour in long-run because the demand for labour will decrease.