If the marginal product of labor increases because of a shift of the marginal product curve,it will likely cause _____
A)an increase in the price of output produced by labor.
B)an increase in labor demand.
C)an increase in labor supply.
D)a fall in the wage paid to labor.
E)a fall in the number of workers employed.

Question

Quizplus · Accepted Answer

An increase in the marginal product of labor means that each additional unit of labor is producing more output. This will increase the productivity of the firm and make it more profitable. To take advantage of this, the firm will want to hire more labor, which will increase the demand for labor. As a result, the wage paid to labor is likely to increase, not decrease. Option A is not necessarily true because the increase in the price of output depends on the elasticity of demand. Option C is unlikely because an increase in the marginal product of labor will not affect the willingness of workers to supply labor. Option D is incorrect because an increase in labor productivity will increase the wage, not decrease it. Option E is incorrect because an increase in the marginal product of labor will increase the demand for labor, not decrease it.

If the Marginal Product of Labor Increases Because of a Shift