Refer to Figure 18-5. If the relevant labor supply curve is S₂ and the current wage is W₁,

A) there is a surplus of labor.
B) the quantity of labor demanded exceeds the quantity of labor supplied.
C) an increase in the minimum wage could restore equilibrium in the market.
D) firms will need to raise the wage to restore equilibrium.

Labor Supply Curve

A graph showing the relationship between the wage rate and the quantity of labor that workers are willing to provide at that rate.

Current Wage

The present amount of money that a worker receives in exchange for their labor, usually expressed per hour, day, or per work output.

Surplus of Labor

A surplus of labor occurs when the supply of labor exceeds the demand, resulting in unemployment or underemployment in the market.