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
An immediate increase in labor demand as firms adjust production upward.
B
A decrease in labor supply as workers choose leisure over employment.
C
An excess supply of labor (unemployment) may occur.
D
No effect on employment because the market naturally adjusts to the new wage.
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