What happens to the equilibrium wage and quantity of labour if output price rises?
A)The equilibrium wage and the equilibrium quantity of labour rise.
B)The equilibrium wage and the equilibrium quantity of labour fall.
C)The equilibrium wage falls and the equilibrium quantity of labour rises.
D)The equilibrium wage rises and the equilibrium quantity of labour falls.

Question

Quizplus · Accepted Answer

When the output price rises, firms are willing to produce more because they can sell their output at a higher price, leading to an increased demand for labour. This increased demand for labour pushes up the equilibrium wage and also increases the equilibrium quantity of labour as firms hire more workers to produce more output.

What Happens to the Equilibrium Wage and Quantity of Labour