Suppose a firm finds that it must raise wages for all of its workers every time it tries to expand its workforce.This means
A)It will produce more than it would in a competitive labor market.
B)The marginal factor cost curve is below the average cost of labor curve.
C)The firm has market power.
D)The labor market is perfectly competitive.

Question

Quizplus · Accepted Answer

If the firm must raise wages every time it tries to expand its workforce, this indicates a shortage of workers and the firm has significant market power in the labor market. This is because in a perfectly competitive labor market, the equilibrium wage rate is determined by the intersection of the supply and demand curves for labor, and firms cannot influence wages through their hiring decisions. Therefore, the fact that the firm has to pay higher wages to recruit workers suggests that it has some monopoly power in the labor market.

Suppose a Firm Finds That It Must Raise Wages for All