An increase in the wage rate will change
A) only the amount of labor hired.
B) the amount of labor employed, and it may also change the amount of other inputs employed.
C) the price the firm charges for the product, but it will not affect the demand for any of the inputs.
D) the firmʹs profit-maximizing level output, but not its usage of inputs.

Question

Quizplus · Accepted Answer

An increase in the wage rate affects the cost of labor, which can lead to adjustments in the amount of labor employed. Firms may also alter the use of other inputs as a substitution effect, seeking to maintain production levels or reduce costs.

An Increase in the Wage Rate Will Change