Limited access

Upgrade to access all content for this subject

Microeconomic theory suggests that imposing a price floor will lead to too little being purchased. In the labor market, this implies that implementing a minimum wage should increase unemployment.

Computer simulations based on this theory show imposing a minimum wage should increase unemployment. However, many studies suggest that in the real world, a minimum wage has little or no effect on the unemployment rate. In some cases, it appears that imposing a minimum wage actually decreases employment.

If one accepts that the minimum wage is not having the expected effect on unemployment, then:

Select TWO answers.


the models should be modified to better reflect what we are observing in the real world.


the data collected must be wrong, since it does not agree with the computer models.


the hypotheses related to the effects of a minimum wage on unemployment should be refined.


the computers are not running properly and that the encoded data must be wrong.

Select an assignment template