Figure 18-3

-Refer to Figure 18-3.Assume W₁ = $20 and W₂ = $18 and the market is always in equilibrium.Then the shift of the labor supply curve from S₁ to S₂

Question

Figure 18-3
 
-Refer to Figure 18-3.Assume W₁ = $20 and W₂ = $18 and the market is always in equilibrium.Then the shift of the labor supply curve from S₁ to S₂

Quizplus · Accepted Answer

When the labor supply curve shifts from S₁ to S₂, the equilibrium wage rate decreases from $20 to $18. As a result, the value of the marginal product of labor, which is equal to the equilibrium wage rate in a perfectly competitive market, decreases by $2. Therefore, the correct answer is B, which states that the shift of the labor supply curve decreases the value of the marginal product of labor by $2.

Figure 18-3 -Refer to Figure 18-3.Assume W₁ = $20 and W₂ =