-The table above gives information about the labour market in Lantis, a community in which the labour market is perfectly competitive. If the value of marginal product of labour increased by $10 an hour at all quantities of labour, the equilibrium wage rate _______ an hour and the quantity of labour employed _______.
A) stays at $15; decreases to 300 hours
B) rises to $10; increases to 600
C) rises to $20; increases to 500 hours
D) None of the above answers is correct.

Question

-The table above gives information about the labour market in Lantis, a community in which the labour market is perfectly competitive. If the value of marginal product of labour increased by $10 an hour at all quantities of labour, the equilibrium wage rate _______ an hour and the quantity of labour employed _______.
A) stays at $15; decreases to 300 hours 
B) rises to $10; increases to 600 
C) rises to $20; increases to 500 hours 
D) None of the above answers is correct.

Quizplus · Accepted Answer

In a perfectly competitive labour market, the equilibrium wage rate is determined by the value of the marginal product of labour. If this value increases by $10 at all quantities of labour, the new equilibrium wage rate would rise by $10 from the original rate, and since firms are willing to pay more for labour due to its higher productivity, the quantity of labour employed would also increase.

-The Table Above Gives Information About the Labour Market in Lantis