A price floor in the labour market set above the equilibrium wage is best described by which term?

• A. Rent control
• B. Minimum wage
• C. Nominal GDP
• D. Inflation

Answer: (B)

A price floor is a legal minimum price. In the labor market, that minimum is the wage. When the floor is set above the wage that would clear the market, it prevents wages from falling to the equilibrium level. This makes more people want jobs while firms hire fewer workers, creating unemployment or a surplus of labor. The term that best describes this is a minimum wage. It’s not rent control (which is a price ceiling on rents) and not related to nominal GDP or inflation, which measure different things.