Figure 6-9

-Refer to Figure 6-9. In this market, a minimum wage of $7 is
A)binding and creates a labor shortage.
B)binding and creates unemployment.
C)nonbinding and creates a labor shortage.
D)nonbinding and creates neither a labor shortage nor unemployment.

Question

Figure 6-9
 
-Refer to Figure 6-9. In this market, a minimum wage of $7 is
A)binding and creates a labor shortage. 
B)binding and creates unemployment. 
C)nonbinding and creates a labor shortage. 
D)nonbinding and creates neither a labor shortage nor unemployment.

Quizplus · Accepted Answer

A minimum wage of $7 is binding if it is set above the equilibrium wage, leading to a surplus of labor (more people are willing to work at that wage than there are jobs available), which results in unemployment.

Figure 6-9 -Refer to Figure 6-9. in This Market, a Minimum Wage