Refer to the above graph.It shows a firm that buys its inputs and sells its output in competitive markets.If the firm develops a new technology that increases labor productivity,the equilibrium level of employment for this firm is expected to be: A) L₀. B) zero. C) lower than L₀. D) higher than L₀.

Question

Quizplus · Accepted Answer

When the firm develops a new technology that increases labor productivity, it becomes more efficient, leading to a decrease in the cost of production for each level of output. This results in an increase in the level of profits for the firm. With the increased profit, the firm can afford to hire additional employees, which will result in an increase in the equilibrium level of employment, shifting from LS1U1B10S1U1B0 to LS1U1B20S1U1B0. Therefore, the equilibrium level of employment for this firm is expected to be higher than LS1U1B10S1U1B0.

Refer to the Above Graph