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

-(Exhibit: Wage Determination in Perfect Competition) If the price of the good that labor produces goes down, the demand for labor will _______ and the _______ .
A) shift to the right; MRP of labor will fall
B) shift to the left; MRP of labor will fall
C) shift to the left; MFC of labor will rise
D) shift to the right; MFC of labor will fall

Question

Use the following to answer question(s): Wage Determination in Perfect Competition
 
-(Exhibit: Wage Determination in Perfect Competition) If the price of the good that labor produces goes down, the demand for labor will _______ and the _______ .
A) shift to the right; MRP of labor will fall 
B) shift to the left; MRP of labor will fall 
C) shift to the left; MFC of labor will rise 
D) shift to the right; MFC of labor will fall

Quizplus · Accepted Answer

According to the exhibit, a decrease in the price of the good that labor produces will result in a leftward shift in the demand for labor curve. This is because firms will be willing to hire fewer workers at any given wage rate. As a result, the marginal revenue product (MRP) of labor will fall, which means that the value of each additional unit of labor will be lower. Therefore, choice B is the correct answer.

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