📚 Learning Guide
Labor Market Equilibrium
hard

In a labor market, if the equilibrium wage is analogous to the point where supply meets demand for a product, then the optimal number of workers hired is to labor as the optimal quantity of goods produced is to what?

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Learning Path
Learning Path

Question & Answer
1
Understand Question
2
Review Options
3
Learn Explanation
4
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Choose the Best Answer

A

Market price

B

Marginal cost

C

Total revenue

D

Consumer demand

Understanding the Answer

Let's break down why this is correct

Answer

In a labor market, the equilibrium wage is the point where the number of workers that employers want to hire matches the number of workers who want to work at that wage. This is similar to how the optimal quantity of goods produced is the point where the supply of goods meets the demand for those goods. Just as producers aim to make enough products to satisfy buyers without creating too much excess, employers want to hire just the right number of workers to meet their business needs. For example, if a bakery finds that it sells 100 loaves of bread daily, it would hire just enough bakers to produce that amount without wasting resources. Therefore, the optimal number of workers hired relates directly to how well the supply of labor meets the demand for labor, just as the optimal quantity of goods produced relates to supply meeting demand in the product market.

Detailed Explanation

The optimal quantity of goods produced is determined by the marginal cost. Other options are incorrect because Market price is what buyers pay, not the cost of making more goods; Total revenue is the money made from selling all goods, not the cost of producing them.

Key Concepts

Labor Market Equilibrium
Marginal Revenue Product of Labor
Socially Optimal Output
Topic

Labor Market Equilibrium

Difficulty

hard level question

Cognitive Level

understand

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