Suppose that the market for labor is initially in equilibrium.An increase in the price of output will cause

Question

Quizplus · Accepted Answer

An increase in the price of output will increase the demand for labor as firms will want to produce more and will need more workers to do so. This will lead to an increase in the equilibrium wage (as firms compete for a limited number of workers) and an increase in the quantity of labor (as more workers are willing to supply their labor at the higher wage). Therefore, choice A is the correct answer.

Suppose That the Market for Labor Is Initially in Equilibrium