Refer to the information provided in Figure 10.3 below to answer the questions that follow. Figure 10.3
-Refer to Figure 10.3. The market wage is initially W0 and the firm is initially at Point A. Labor supply decreases from S0 to S1, if the firm does not change the amount of capital it employs, the firm will move to Point ________ to maximize profits.
A) B
B) C
C) E
D) F

Question

Refer to the information provided in Figure 10.3 below to answer the questions that follow.  Figure 10.3
-Refer to Figure 10.3. The market wage is initially W0 and the firm is initially at Point A. Labor supply decreases from S0 to S1, if the firm does not change the amount of capital it employs, the firm will move to Point ________ to maximize profits.
A) B 
B) C 
C) E 
D) F

Quizplus · Accepted Answer

When labor supply decreases, the wage rate increases. To maximize profits without changing capital, the firm will hire less labor, moving from Point A to Point B, where the new labor supply curve S1 intersects the firm's labor demand curve.

Refer to the Information Provided in Figure 10