The government sets a minimum wage above the current equilibrium wage. What effect does the minimum wage have on equilibrium in the labor market? What are its effects on consumer surplus, producer surplus, and total surplus in the labor market? (Hint: in the labor market, workers are 'producers' and firms are 'consumers'.)

Question Completion:

A binding minimum wage

▼

does not change

raises

lowers

the market wage and

▼

increases

decreases

does not change

the market employment level.

A binding minimum wage

▼

raises

the market wage and

▼

decreases

the market employment level.

Explanation:

This action of the government of setting the minimum wage above the current equilibrium wage will disrupt the equilibrium of labor demand and supply.  Certainly, more labor will be available (the supply side will increase) while the demand for labor by firms or labor consumers will decrease.  This reflects the market dynamics caused by the increased price (in the form of increased minimum wage) and the quantities of labor supplied and demanded.

answer///a coalition;

answerindividual preferences are not revealed in the market for the good;