Use the following to answer question(s): Wage Determination in Perfect Competition

-(Exhibit: Wage Determination in Perfect Competition) An increase in the marginal product of labor will result in:
A) an increase in the market supply of labor.
B) an increase in the demand for labor.
C) a decrease in the MRP of labor.
D) a lower wage for labor.

Question

Use the following to answer question(s): Wage Determination in Perfect Competition
 
-(Exhibit: Wage Determination in Perfect Competition) An increase in the marginal product of labor will result in:
A) an increase in the market supply of labor. 
B) an increase in the demand for labor. 
C) a decrease in the MRP of labor. 
D) a lower wage for labor.

Quizplus · Accepted Answer

An increase in the marginal product of labor will lead to an increase in the demand for labor, as firms will want to hire more workers to take advantage of the higher productivity. This will lead to a higher equilibrium wage as the supply of labor remains constant but the demand increases. Therefore, option B is the correct choice.

Use the Following to Answer Question(s): Wage Determination in Perfect