A firm would be likely to lay off workers following:
A) an increase in the demand for labor.
B) an increase in the marginal revenue product of labor.
C) the imposition of a new minimum wage below the current equilibrium wage.
D) a successful attempt by an industrial union to push wages above the marginal revenue product of labor.

Question

Quizplus · Accepted Answer

When an industrial union successfully pushes wages above the marginal revenue product of labor, it means that workers are being paid more than they contribute to the firm's revenue. This increases the firm's production costs and reduces its profitability. To maintain profitability, the firm may choose to lay off workers to reduce labor costs. Therefore, option D is the most appropriate choice. Option A and B are incorrect because they indicate an increase in labor demand and productivity, which would encourage the firm to hire more workers, not lay them off. Option C is also incorrect because if the minimum wage is lower than the equilibrium wage, it would not affect the firm's decision to lay off workers.

A Firm Would Be Likely to Lay Off Workers Following