refer to the following diagram of a perfectly competitive labor market: -At wage rate W₁ there is an: A)excess supply of labor and the wage rate will fall B)excess supply of labor and the wage rate will rise C)excess demand for labor and the wage rate will fall D)excess demand for labor and the wage rate will rise

Question

Quizplus · Accepted Answer

At wage rate W₁, the quantity of labor supplied (Q2) exceeds the quantity of labor demanded (Q1), creating an excess supply of labor. This will put downward pressure on the wage rate, as workers compete for employment. Therefore, the wage rate will fall.

Refer to the Following Diagram of a Perfectly Competitive Labor