Asked by James O'Connor on Jul 23, 2024
Verified
Refer to Figure 18-5. Assume W1 = $15 and W2 = $11, and the market is always in equilibrium. A shift of the labor supply curve from S2 to S1 would
A) decrease the value of the marginal product of labor by $4.
B) increase the value of the marginal product of labor by $4.
C) increase the value of the marginal product of labor by more than $4.
D) not change the value of the marginal product of labor.
Marginal Product
The extra production obtained when one additional unit of a specific input is used, while all other inputs stay unchanged.
Labor Supply Curve
A graphical representation showing the relationship between the quantity of labor supplied and the wage rate in a given market.
Equilibrium
A state in a market where supply equals demand, with no external forces causing disruption, hence prices tend to stabilize.
- Ascertain the consequences of alterations in the supply and demand of labor on the levels of wages and employment.
Verified Answer
YM
yusry mustadJul 27, 2024
Final Answer :
B
Explanation :
The shift of the labor supply curve from S2 to S1, given the equilibrium wages before and after the shift ($11 to $15), indicates an increase in the value of the marginal product of labor by $4. This is because the wage rate in a competitive labor market reflects the value of the marginal product of labor, and an increase in the wage rate from $11 to $15 suggests that the value of the marginal product of labor has increased by $4.
Learning Objectives
- Ascertain the consequences of alterations in the supply and demand of labor on the levels of wages and employment.