APFIVE Effects of a Binding Minimum Wage
If the government imposes a minimum wage above the equilibrium wage in a competitive labor market, what is the most likely immediate effect?
A
No effect on employment because the market naturally adjusts to the new wage.
B
An immediate increase in labor demand as firms adjust production upward.
C
A decrease in labor supply as workers choose leisure over employment.
D
An excess supply of labor (unemployment) may occur.
Question Leaderboard
Not enough data yet to show leaderboard.