A favorable supply shock shifts the production function curve ________ and the labor demand curve ________.
A)upward,upward
B)upward,downward
C)downward,upward
D)downward,downward

Question

Quizplus · Accepted Answer

A favorable supply shock increases productivity and efficiency, which results in a shift of the production function curve upward. As output increases, firms require more labor, leading to an increase in the labor demand curve as well.

A Favorable Supply Shock Shifts the Production Function Curve ________