Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
It increases incentives for employers to hire more workers.
B
It decreases the overall supply of labor.
C
It may lead to increased unemployment if the wage is set above equilibrium.
D
It has no effect on employment levels.
Understanding the Answer
Let's break down why this is correct
Answer
A minimum wage is a type of price floor that sets the lowest amount workers can be paid for their labor. When the government establishes a minimum wage, it aims to ensure that workers earn enough to meet their basic needs. This can encourage more people to seek jobs because they know they will receive a fair wage, which can lead to an increase in the supply of labor. However, if the minimum wage is set too high, it may discourage some employers from hiring as many workers because they have to pay more, which could lead to fewer job opportunities. For example, if a small café must pay its workers $15 an hour instead of $10, it might decide to cut down on staff or reduce hours to manage costs, affecting overall employment levels.
Detailed Explanation
When the minimum wage is set too high, employers may not afford to hire as many workers. Other options are incorrect because Some might think that higher wages mean more hiring; It's easy to think that higher wages would reduce the number of people wanting to work.
Key Concepts
minimum wage example
incentives for production
Topic
Understanding Price Floors
Difficulty
medium level question
Cognitive Level
understand
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