Firefighters are highly skilled workers who are typically employed by city governments. If a city reduces the wage rate paid to firefighters to be less than the equilibrium wage rate, what happens to the economic rents earned by the firefighters?
A) Increase
B) Decrease
C) Remain unchanged
D) Public employees like firefighters cannot earn economic rents.

Question

Quizplus · Accepted Answer

If the wage rate paid to firefighters is reduced to be less than the equilibrium wage rate, it means that the wage rate is below the value of their marginal product of labor, leading to a decrease in economic rents earned by firefighters. Economic rent is the surplus earned by a factor of production above the minimum amount necessary to induce it to remain in its current use, and it flows to whoever owns the factor of production.

Firefighters Are Highly Skilled Workers Who Are Typically Employed by City