The figure given below represents equilibrium in the labor market with the demand and supply curves of labor. Figure 14.6 In the figure,
D = MRP implies demand for labor = Marginal Revenue Product
MFC represents Marginal Factor Cost curve
S represents the supply curve of labor
According to Figure 14.6,what is the wage and quantity of labor hired by a competitive firm?
A)$12 and 75 laborers
B)$20 and 75 laborers
C)$15 and 125 laborers
D)$10 and 250 laborers
E)$23 and 50 laborers

Question

The figure given below represents equilibrium in the labor market with the demand and supply curves of labor. Figure 14.6  In the figure,
D = MRP implies demand for labor = Marginal Revenue Product
MFC represents Marginal Factor Cost curve
S represents the supply curve of labor
According to Figure 14.6,what is the wage and quantity of labor hired by a competitive firm?
A)$12 and 75 laborers 
B)$20 and 75 laborers 
C)$15 and 125 laborers 
D)$10 and 250 laborers 
E)$23 and 50 laborers

Quizplus · Accepted Answer

The equilibrium wage and quantity of labor hired can be found at the intersection of the demand and supply curves, which is at a wage of $15 and a quantity of 125 laborers. At this point, the demand for labor (MRP) is equal to the marginal cost of labor (MFC), and both firms and workers are happy with the wage rate and employment level. Therefore, the best choice is option C.

The Figure Given Below Represents Equilibrium in the Labor Market