Binding Minimum Wage and Allocative Efficiency
In a perfectly competitive labor market, what is the long-run effect of a binding minimum wage on allocative efficiency?
A
It increases allocative efficiency by ensuring workers have more income to spend across various markets.
B
Allocative efficiency remains unchanged since wages do not influence demand for goods and services.
C
It leads to overallocation of resources towards industries with less elastic demand for labor reducing overall economic efficiency.
D
It improves allocative efficiency by matching worker skills with job requirements more effectively due to higher wages.
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