A firm notices that its most productive workers are leaving for better-paying jobs. How should the firm respond in terms of labor demand, and what economic concepts justify this action?

When a firm realizes that its most productive workers are leaving for better-paying jobs, it should respond by increasing its labor demand. This means the firm should consider raising wages or improving working conditions to attract and retain talented employees. The economic concept of supply and demand explains this situation; as the demand for skilled workers increases, the firm needs to offer more competitive pay to keep its workforce. For example, if a company that makes video games is losing talented programmers to competitors, it might raise salaries or provide bonuses to keep those skilled workers from leaving. By doing this, the firm can maintain its productivity and ensure it has the right people to succeed in the market.