Consider the following model of the labor market: Labor supply: Labor demand: The value of the equilibrium quantity of labor, L, and wage, w, are: A) =4^4/5; = 1/5. B) = 5; = 6. C) = 6; = 5. D) =6; = 6. E) Not enough information is given.

Question

Quizplus · Accepted Answer

To find the equilibrium quantity of labor, we need to set labor supply equal to labor demand:

20 – 2w = 5w – 5

Simplifying this equation, we get:

7w = 25

w = 25/7

To find the equilibrium quantity of labor, we substitute this value of w back into either the labor supply or labor demand equation:

Labor supply: Ls = 20 – 2(25/7) = 6/7

Labor demand: Ld = 5(25/7) – 5 = 0

Since labor demand is zero, the equilibrium quantity of labor is 6/7. Therefore, the correct answer is choice C.

Consider the Following Model of the Labor Market