Wage Rate Quantity of Labor Demanded $16 800
14 1,000
12 1,200
10 1,600
8 1,800
Refer to the given data.Suppose that the union that provides labor to firms in this market successfully negotiates an increase in the wage rate from $8 to $10.As a result of the wage increase, firms will hire
A)fewer workers, and the total paid out for wages will decline.
B)fewer workers, but the total paid out for wages will increase.
C)fewer workers, but the total paid out for wages will remain unchanged.
D)more capital, if capital and labor are used in fixed proportions in production.

Question

Quizplus · Accepted Answer

When the wage rate increases from $8 to $10, the quantity of labor demanded decreases from 1,800 to 1,600. However, the total wage payment increases because the higher wage rate ($10) is applied to a still relatively high number of workers (1,600), resulting in a higher total wage payout compared to the lower wage rate ($8) applied to 1,800 workers.