A fall in the real wage rate ________ firms' profits and leads to ________ in the quantity supplied.
A)raises;an increase
B)raises;a decrease
C)lowers;an increase
D)lowers;a decrease
E)does not change;no change

Question

Quizplus · Accepted Answer

A fall in the real wage rate means that the cost of labor for firms has decreased. This will lead to an increase in firms' profits, as they can now produce more output with the same amount of labor. Additionally, the lower real wage rate will make it more attractive for firms to hire more workers, leading to an increase in the quantity supplied.

A Fall in the Real Wage Rate ________ Firms' Profits