An increase in the demand for automobiles will increase the demand for labor used to produce the automobiles due to a(n)
A)increase in the marginal revenue product of labor
B)decrease in the marginal revenue product of labor
C)increase in the marginal revenue product of automobiles
D)decrease in the marginal revenue product of automobiles
E)decrease in the price of automobiles

Question

Quizplus · Accepted Answer

An increase in demand for automobiles means that firms will need to produce more automobiles to meet this increased demand. This, in turn, will increase the demand for labor used to produce the automobiles because there will be a higher marginal revenue product of labor. As firms produce more automobiles, they will need to hire more workers to produce them, which will increase the demand for labor.

An Increase in the Demand for Automobiles Will Increase the Demand