📚 Learning Guide
Labor Market Equilibrium
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In a labor market where wage rates are determined by supply and demand, which of the following labor market interventions would likely lead to an increase in equilibrium wage rates?

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Learning Path

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Choose the Best Answer

A

Implementing a minimum wage above the equilibrium level

B

Providing subsidies to employers for hiring low-skilled workers

C

Reducing tax incentives for companies

D

Increasing the availability of vocational training programs

Understanding the Answer

Let's break down why this is correct

Answer

In a labor market, wage rates are influenced by the supply of workers and the demand for labor from employers. When demand for workers increases, perhaps due to a growing industry or more job openings, employers may compete for talent by raising wages. If the supply of workers decreases, for example, if many people leave the workforce or if there are fewer qualified candidates, this can also push wages up as employers struggle to fill positions. A concrete example is when a tech company expands and needs more engineers; if there are not enough engineers available, they may offer higher salaries to attract qualified applicants. Therefore, interventions that boost demand for workers or reduce the available supply can lead to higher equilibrium wage rates.

Detailed Explanation

Setting a minimum wage above the current level means workers must be paid more. Other options are incorrect because Some might think giving money to employers will help them pay workers more; Reducing tax benefits for companies might seem like it would raise wages.

Key Concepts

wage determination
labor market interventions
Topic

Labor Market Equilibrium

Difficulty

medium level question

Cognitive Level

understand

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