Question

If a binding minimum wage increases in a perfectly competitive labor market, then which of the following will likely occur in the labor market?
The supply of workers will increase.
Answer A: The supply of workers will increase.
Answer B: The supply of workers will decrease.
Answer C: The demand for workers will increase.
Answer D: The demand for workers will decrease.
Answer E: The quantity of workers supplied will increase

Answer 1

If a binding minimum wage increases in a perfectly competitive labor market, what will happen is that;

Answer D: The demand for workers will decrease.

• A perfectly competitive labor market is defined as one in which a cluster of numerous firms are in competition for workers.

• Now, if the binding minimum wage is increased, it means that there will likely be some workers that are laid off in order for the company to continue to make profit and stay in operations. This means that there will be a decrease in employment and an increase in unemployment which translates to a decrease in the amount of workers demanded by employers.

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Answer 2

If a situation arises where the binding minimum wage increases in a perfectly competitive market, D: The demand for workers will decrease.

A binding minimum wage:

• Is the least amount that employers must pay laborers.
• Is above the equilibrium labor rate as determined by the market.

Should this be the case, producers/ employers will demand less labor because they will be unwilling to pay a labor rate that is higher than the equilibrium the market recommends.

In conclusion, option D is correct.

Find out more on binding wages at https://brainly.com/question/6625517.