Table 17.3.1

-Table 17.3.1 gives information about the labour market in Lantis,a community in which the labour market is perfectly competitive.If the price of the good that Lantis produces increases and the value of marginal product of labour changes by $10 an hour,the equilibrium wage rate is ________ an hour and the quantity of labour employed is ________.

Question

Table 17.3.1
 
-Table 17.3.1 gives information about the labour market in Lantis,a community in which the labour market is perfectly competitive.If the price of the good that Lantis produces increases and the value of marginal product of labour changes by $10 an hour,the equilibrium wage rate is ________ an hour and the quantity of labour employed is ________.

Quizplus · Accepted Answer

According to the table, the labour market equilibrium wage rate is $15/hr and the quantity of labour employed is 400 hours. If the value of marginal product of labour changes by $10 an hour, then the new equilibrium wage rate would be $15+$10=$25/hr. Using the labour demand equation, the new quantity of labour employed would be (2500-25w)/5= (2500-25(25))/5 = 500 hours. Therefore, the correct answer is option C, with a wage rate of $20/hr and a quantity of labour employed of 500 hours.

Table 17.3.1 -Table 17.3.1 Gives Information About the Labour Market in Lantis,a