Assume a perfectly competitive labor market is initially in equilibrium with a downsloping demand curve and an upsloping supply curve. If the government then sets a binding minimum wage, which of the following is correct?
A.
There would be a shortage in the labor market.
B.
The quantity of labor supplied would be greater than the quantity of labor demanded.
C.
The number of workers hired would remain the same.
D.
The number or workers hired would increase.
E.
The market would remain in equilibrium regardless of the wage paid.
Exam No：AP Micro Practice Test 1 Year：2024 Question No：40
Answer:
B
Knowledge points:
2.8 The Effects of Government intervention in Markets
5.3 Profit-Maximizing Behavior in Perfectly Competitive Factor Markets
6.4 The Effects of Government Intervention in Different Market Structures
Solution:
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