Suppose the supply of labor schedule decreases in a perfectly competitive labor market while the market demand schedule remains unchanged. A profit-maximizing representative firm will
A) hire more workers.
B) hire less workers.
C) hire the same number of workers.
D) substitute capital for labor.

Question

Quizplus · Accepted Answer

When the supply of labor decreases in a perfectly competitive labor market and demand remains unchanged, the equilibrium wage rate increases. As a result, a profit-maximizing firm will hire fewer workers due to the higher cost of labor.

Suppose the Supply of Labor Schedule Decreases in a Perfectly