Asked by abdulbaset charsi on May 30, 2024
Verified
An effective minimum wage is set
A) above the equilibrium level.
B) below the equilibrium level.
C) at the equilibrium level.
Effective Minimum Wage
The lowest wage that an employer can legally pay an employee, adjusted for factors such as living costs and inflation.
Equilibrium Level
The state in an economy or market where supply equals demand, and there is no inherent force to change the price or quantity.
- Comprehend the effects of minimum wage laws on employment levels.
Verified Answer
GM
Gurwinder MultaniMay 31, 2024
Final Answer :
A
Explanation :
An effective minimum wage is set above the equilibrium level to ensure that workers receive a fair wage and to reduce the exploitation of workers by employers. If the minimum wage were set at or below the equilibrium level, it would not have any effect on wages and would be ineffective in reducing exploitation. By setting the minimum wage above the equilibrium level, it creates a price floor that puts upward pressure on wages, allowing workers to earn a higher wage and have a better standard of living. However, there may be adverse effects on employment levels, as employers may have to reduce their workforce to offset the increased labor costs.
Learning Objectives
- Comprehend the effects of minimum wage laws on employment levels.