In some remote communities, there was only one employer in the local labor market several years ago, but the number of firms that hired workers in the market increased over time. What is the expected change in the local labor market as the number of employers increased (ceteris paribus)?
A) Wages and employment increase.
B) Wages remain the same but employment increases.
C) Wages increase but employment remains the same.
D) Wages and employment decline.

Question

Quizplus · Accepted Answer

As the number of employers increases, there is more competition for workers and therefore wages and employment are likely to increase. This is because workers have more options and can negotiate higher wages and better working conditions. However, ceteris paribus, this assumes that there is no decrease in demand for labor or decrease in productivity as the number of firms increase.

In Some Remote Communities, There Was Only One Employer in the Local