Labor Market Shifts from Minimum Wage and Supply Restriction

Steps:

• Original equilibrium at wage W where supply equals demand.
• Union-imposed minimum wage W1 (above W) acts as price floor, causing excess labor supply and unemployment.
• Government restriction on immigrants shifts supply curve left, reducing labor available at each wage.
• New equilibrium occurs at W1 (binding floor) with lower employment where restricted supply meets demand.

Why B is correct:

• B shows wage at W1 and reduced quantity employed, per price floor law creating surplus amid leftward supply shift.

Why the others are wrong:

• A: Ignores supply restriction, overstates employment.
• C: Assumes full supply shift without floor, understates wage.
• D: Predicts no change, contradicts both policies.

Final answer: B