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Figure: The Minimum Wage
-(Figure: The Minimum Wage) Look at the figure The Minimum Wage. What is the quantity of labor demanded at a binding minimum wage of P₃?

Question

Use the following to answer questions :
Figure: The Minimum Wage

-(Figure: The Minimum Wage) Look at the figure The Minimum Wage. What is the quantity of labor demanded at a binding minimum wage of P₃?

Quizplus · Accepted Answer

At a binding minimum wage of P3, the quantity of labor demanded is Q1. This is because the minimum wage sets a floor on the price of labor, and employers will only hire workers up to the point where the marginal cost of labor (the wage rate) is equal to the marginal revenue product of labor (the value of the additional output produced by the worker).

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