Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
It increases demand as labor becomes more productive.
B
It decreases demand as the cost of labor rises.
C
It has no effect if wages remain constant.
D
It leads to layoffs to reduce costs.
Understanding the Answer
Let's break down why this is correct
Answer
When the marginal product of labor increases, it means that each additional worker can produce more goods or services for the firm. This makes hiring more workers more valuable to the company because they can generate more profit from the extra output. As a result, the firm is likely to demand more labor to take advantage of this increased productivity. For example, if a factory finds that adding one more worker allows it to produce ten more widgets instead of five, the factory will want to hire more workers to boost its production and sales. Therefore, an increase in the marginal product of labor leads to a higher demand for labor, as firms seek to maximize their output and profits.
Detailed Explanation
When workers become more productive, they can produce more goods in the same time. Other options are incorrect because Some might think that higher productivity means higher costs; It's a common mistake to think that constant wages mean no change in demand.
Key Concepts
Marginal Product of Labor
Demand for Labor
Wage Structure
Topic
Demand and Supply in Labor Markets
Difficulty
medium level question
Cognitive Level
understand
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