Which of the following events would lead to an increase in the marginal product of labor for every quantity of labor?
A)An increase in the real wage
B)A decrease in the real wage
C)A favorable supply shock such as a fall in the price of oil
D)An adverse supply shock, such as a reduced supply of raw materials

Question

Quizplus · Accepted Answer

A favorable supply shock such as a fall in the price of oil would lead to a reduction in production costs, which would increase the marginal product of labor for every quantity of labor. A decrease in the real wage might lead to firms hiring more workers to maintain the same level of output but would not necessarily increase the marginal product of labor. An adverse supply shock, such as a reduced supply of raw materials, would decrease the marginal product of labor for every quantity of labor.

Which of the Following Events Would Lead to an Increase