Wage Above Equilibrium Due to Minimum Wage Law

Steps:

• Equilibrium wage of $10 means labor supply equals demand at that rate.
• Actual wage of $12 exceeds equilibrium, indicating a price floor preventing wages from falling to$10.
• A binding minimum wage sets the floor at $12, creating labor shortage but enforcing higher pay.
• This intervention explains the deviation without shifting supply or demand curves.

Why C is correct:

• Minimum wage acts as a price floor above equilibrium, legally requiring wages at $12 and causing the observed rate.

Why the others are wrong:

• A: Employer competition increases labor demand, raising equilibrium wage to $12, not leaving it at$10.
• B: Surplus of labor (supply > demand) pushes wages below equilibrium to $10 or lower, not above.
• D: Unpaid training reduces worker costs, shifting supply right and lowering equilibrium wage, not raising actual wage.

Final answer: C