In the following figure, the first panel shows a market situation prior to regulation and the second panel shows the effects of regulation.Figure 14.2
In the figure,
D: Demand curve for automobiles
S 1 : Supply curve of automobiles prior to regulation
S 2 : Supply curve of automobiles after regulation
FG: Clean up cost per unit
-The demand curve for labor indicates that:
A)as the real wage rate increases, employers will hire more workers.
B)as the nominal wage rate increases, employers will hire more workers.
C)as the nominal wage rate decreases, the real wage rate increases.
D)as the real wage rate increases, employers will hire fewer workers.
E)as the real wage rate decreases the nominal wage rate increases.

Question

In the following figure, the first panel shows a market situation prior to regulation and the second panel shows the effects of regulation.Figure 14.2
  In the figure,
D: Demand curve for automobiles
S 1 : Supply curve of automobiles prior to regulation
S 2 : Supply curve of automobiles after regulation
FG: Clean up cost per unit
-The demand curve for labor indicates that:
A)as the real wage rate increases, employers will hire more workers. 
B)as the nominal wage rate increases, employers will hire more workers. 
C)as the nominal wage rate decreases, the real wage rate increases. 
D)as the real wage rate increases, employers will hire fewer workers. 
E)as the real wage rate decreases the nominal wage rate increases.

Quizplus · Accepted Answer

The question asks about the demand curve for labor, not the supply curve. The answer is option D because, according to the law of demand, as the price of something (in this case, the real wage rate) increases, the quantity demanded of that thing (in this case, the number of workers employers are willing to hire) decreases. Therefore, as the real wage rate increases, employers will hire fewer workers, which is reflected in the downward-sloping demand curve for labor.

In the Following Figure, the First Panel Shows a Market