question archive A binding minimum wage: a
A binding minimum wage: a
Subject:EconomicsPrice:2.88 Bought3
A binding minimum wage:
a. can lead to a surplus of labor,
b. can lead to a shortage of labor,
c. has no effect on the quantity of labor demanded or the quantity of labor supplied,
d. causes only temporary unemployment, since the market will adjust and eliminate any temporary surplus of workers.
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Answer: A
A binding minimum wage means that the legal minimum wage is above the market wage. This results in quantity supplied being higher than quantity demanded and thus a surplus of labor will exist.
