Minimum wages create unemployment in markets where they create a

Question

a. shortage of labor. Unemployment of this type is called frictional.
b. surplus of labor. Unemployment of this type is called frictional.
c. surplus of labor. Unemployment of this type is called structural.
d. shortage of labor. Unemployment of this type is called structural.

Answer 1

The correct answer is:

c. surplus of labor. Unemployment of this type is called structural.

Minimum wages can lead to a surplus of labor, meaning that there are more people looking for jobs than there are jobs available at that wage level. This type of unemployment can be considered structural, as it arises from the mismatch between the wages that employers are willing to pay and the wage level set by minimum wage laws.