An increase in a perfectly competitive firm's demand for labor could be caused by
A)a decrease in the market wage rate.
B)an increase in the market demand for the firm's product.
C)a decrease in the marginal product of workers.
D)an increase in the quantity of labor supplied.

Question

Quizplus · Accepted Answer

An increase in the market demand for the firm's product will result in an increase in the firm's output and therefore, an increase in the demand for labor. The other choices are incorrect because a decrease in the market wage rate would result in a decrease in demand for labor, a decrease in the marginal product of workers would result in a decrease in demand for labor, and an increase in the quantity of labor supplied would result in a decrease in the wage rate and therefore, a decrease in demand for labor.

An Increase in a Perfectly Competitive Firm's Demand for Labor