University of Central Florida (UCF) ECO2013 Principles of Macroeconomics Practice Exam 3

The imposition of a minimum wage typically leads to a decrease in the amount of labor hired in the market. When a minimum wage is set above the equilibrium wage (the wage at which supply and demand for labor are balanced), it creates a situation where employers may not be willing or able to hire as many workers at the higher wage. This is primarily because the increased labor cost can lead to reduced demand for workers, resulting in some businesses hiring fewer employees, cutting hours, or possibly even laying off existing staff.

In a competitive labor market, the minimum wage can create a surplus of labor, meaning there are more workers seeking jobs than there are positions available at the new wage level. This can lead to higher unemployment among low-skilled workers who are often the group most affected by minimum wage laws. Additionally, while higher wages may benefit some workers, it can result in unintended consequences such as reduced opportunities for entry-level positions, which can have long-term effects on employment levels in the economy.

The other options reflect misunderstood dynamics of the labor market under minimum wage policies. An increase in jobs or labor supply without unemployment contradicts standard economic principles. Equalizing wages across sectors would imply a uniformity that does not typically occur due to varying demands and regional economic conditions.