Which of the following is TRUE regarding the labor market?
I. The labor supply curve slopes upward because firms maximize profits as they hire more workers.
II. If the real wage rate falls, the quantity of labor firms demand increases.
III. The demand for labor curve slopes downward because as the real wage rate falls, workers demand to work fewer hours.

Question

Quizplus · Accepted Answer

II is true because it reflects the law of demand; as the real wage (the price of labor) decreases, firms will demand more labor because it is cheaper. I is incorrect because the labor supply curve slopes upward due to workers being willing to work more hours as wages increase, not because firms maximize profits by hiring more. III is incorrect because the demand for labor curve slopes downward due to firms wanting to hire fewer workers as wages increase, not because workers want to work fewer hours as wages decrease.

Which of the Following Is TRUE Regarding the Labor Market