Assume that the labor market for auto mechanics is initially in equilibrium.Which of the following would lead to an increase in both the wage rate and employment for auto mechanics?

Question

Quizplus · Accepted Answer

A decrease in the price of a complementary input (such as tools or equipment) would make it less expensive for firms to employ auto mechanics, and therefore increase the demand for their services, leading to an increase in both the wage rate and employment for auto mechanics. A decrease in the price of a substitutable input (such as a part) would lower the cost of producing cars, and could potentially decrease demand for auto mechanics if less repairs are needed. An increase in training costs for auto mechanics would discourage firms from hiring and also decrease the supply of auto mechanics. A decrease in wages in an alternate labor market would make it less attractive for workers to leave the auto mechanic industry, but it wouldn't necessarily increase demand or wages for auto mechanics. A decrease in demand for the output of firms employing auto mechanics would decrease the demand for auto mechanics, leading to a decrease in both the wage rate and employment.

Assume That the Labor Market for Auto Mechanics Is Initially