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JAMB Economics 2004 Question 16

Question 16

Labour Market

Maximum wage legislation seeks to

  1. A.fix wages above the equilibrium wage rate
  2. B.set wages below the equilibrium wage rate
  3. C.deter employers from exploiting their employees
  4. D.ensure an upper limit to the wages payable
Show the answer and explanation

Answer: B (set wages below the equilibrium wage rate)

Explanation

A maximum wage is a legal ceiling; to have any effect it is set below the market (equilibrium) wage rate.