refer to the following diagram of a perfectly competitive labor market: -For the supply and demand curves in the diagram,the level of employment will be highest at: A)wage rate W₁ B)wage rate W₂ C)a wage rate higher than W₁ D)a wage rate lower than W₂

Question

Quizplus · Accepted Answer

At the wage rate W₂, the quantity of labor supplied (U1B0) equals the quantity of labor demanded (U1B12). This is the equilibrium wage rate and employment level. Any wage rate higher than this will result in a surplus of labor (unemployment) as the quantity of labor supplied will exceed the quantity demanded, and any wage rate lower than this will result in a shortage of labor as the quantity demanded will exceed the quantity supplied. Thus, the level of employment will be highest at the equilibrium wage rate W₂.

Refer to the Following Diagram of a Perfectly Competitive Labor