What does an increase in the wage rate cause?
A)a rightward shift of the firm's labour demand curve.
B)a leftward shift of the firm's labour demand curve.
C)a decrease in the quantity of labour demanded.
D)an increase in labour's marginal productivity.

Question

Quizplus · Accepted Answer

An increase in the wage rate typically leads to a decrease in the quantity of labour demanded by firms, as higher wages make it more expensive for firms to hire workers. This does not necessarily shift the labour demand curve itself, which is based on the relationship between the wage rate and the quantity of labour demanded, but moves along the curve to a point where less labour is demanded at the higher wage.

What Does an Increase in the Wage Rate Cause