The government sets a minimum wage above the current equilibrium wage. What effect does the minimum wage have on equilibrium in the labor market? What are its effects on consumer surplus, producer surplus, and total surplus in the labor market?

$($Hint: in the labor market, workers are 'producers' and firms are 'consumers'.$)$

A binding minimum wage $$ the market wage and decreases

$$ the market employment level.

The minimum wage law $$ consumer surplus, $$ producer surplus, and total surplus.

Consider the Edgeworth Box illustrated in the figure to the right. ${}_j^1$ and $I_j^2$ are individual $j\text{'}$s indifference curves and $I_d^1$ and ${}_d^2$ are individual d$\text{'}$s indifference curves. Bundle e represents the initial endowment.

Explain why point e in the figure to the right is not on the contract curve.

Bundle $e$ is not on the contract curve because

A$.$ both consumers can be made better off if consumer $j$ trades wood for candy with consumer $d.$

B$.$ one party cannot be made better off without harming the other from trade.

C$.$ the consumers' marginal rates of substitution are equal at bundle e$.$

D$.$ both consumers can be made better off if consumer $j$ trades candy for wood with consumer $d.$

E$.$ the consumers' indifference curves are tangent at bundle e$.$