In a competitive labor market, why can imposing a binding minimum wage (set above the equilibrium wage) lead to unemployment?

• A. A minimum wage increases the marginal product of labor, so firms hire fewer workers because each worker produces more output.
• B. At the higher mandated wage, the quantity of labor demanded exceeds the quantity of labor supplied, creating a shortage of workers.
• C. A minimum wage eliminates all wage differences across workers, so firms cannot distinguish productivity and must lay off workers at random.
• D. At the higher mandated wage, the quantity of labor supplied exceeds the quantity of labor demanded, creating a surplus of workers.

Answer: (D)