In a perfectly competitive labor market, employers will not pay more than the market wage because:

Question

Quizplus · Accepted Answer

In a perfectly competitive labor market, there are many firms and workers, and the wage rate is determined by the intersection of the supply and demand for labor. At the equilibrium wage rate, the number of workers willing to work for that wage equals the number of workers that firms want to hire. Therefore, employers will not pay more than the market wage because there are plenty of good workers available at that wage rate. If an employer tried to pay a higher wage, they would not be able to attract more good workers than their competitors because they all have access to the same pool of workers willing to work at that wage.

In a Perfectly Competitive Labor Market, Employers Will Not Pay