Exhibit 11-12
-Exhibit 11-12 depicts a single firm hiring labor in a perfectly competitive labor market. Initially, the marginal revenue product of labor is represented by MRP₁ and the firm operates at point D. Suppose there is a technological advance that increases the productivity of labor, which point depicts the likely impact on this firm in their hiring decision?

Question

Exhibit 11-12

-Exhibit 11-12 depicts a single firm hiring labor in a perfectly competitive labor market. Initially, the marginal revenue product of labor is represented by MRP₁ and the firm operates at point D. Suppose there is a technological advance that increases the productivity of labor, which point depicts the likely impact on this firm in their hiring decision?

Quizplus · Accepted Answer

A technological advance that increases the productivity of labor will cause an increase in the marginal revenue product of labor, shifting the MRPL curve upward. This will lead to an increase in the quantity of labor demanded at any given wage rate. Point E represents the equilibrium point after the technological advance, where the firm hires more labor (U2) at a higher wage rate (W2). Therefore, the likely impact on this firm's hiring decision is depicted by point E.

Exhibit 11-12 -Exhibit 11-12 Depicts a Single Firm Hiring Labor in a Labor