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-(Figure: The Minimum Wage) Use Figure: The Minimum Wage. Which point on the x-axis is a binding minimum wage?

Question

Use the following to answer questions: -(Figure: The Minimum Wage) Use Figure: The Minimum Wage. Which point on the x-axis is a binding minimum wage? A) P₁ B) P₂ C) P₃ D) zero

Quizplus · Accepted Answer

A binding minimum wage is one that is set above the equilibrium wage rate, causing a surplus of labor. In this figure, the equilibrium wage rate is at point P₂. Any minimum wage below or at this point is non-binding, while any minimum wage above this point is binding. Point P₃ represents a binding minimum wage, as it is set above the equilibrium and creates a surplus of labor.

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