Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
An increase in the marginal revenue product of labor due to higher demand for the firm's goods.
B
A decrease in the supply of labor resulting from more workers leaving the industry.
C
A government intervention that mandates higher wages across the sector.
D
A significant reduction in the firm's production costs.
Understanding the Answer
Let's break down why this is correct
Answer
In a perfectly competitive labor market, the equilibrium wage rate is determined by the supply and demand for labor. An increase in the equilibrium wage rate usually means that the demand for labor has gone up, which might be due to a rise in the demand for the goods and services that workers produce. For example, if a technology company experiences a surge in orders for its products, it may need to hire more workers, leading to higher wages to attract them. Additionally, if fewer people are willing to work at the previous wage, perhaps due to better opportunities elsewhere, this can also push wages up. Overall, the combination of increased demand for workers and changes in labor supply often drives up the equilibrium wage.
Detailed Explanation
When more people want to buy a firm's products, the firm needs more workers. Other options are incorrect because Some might think fewer workers means higher wages; It's easy to think that government rules can raise wages.
Key Concepts
Labor Supply and Demand
Equilibrium Wage Rate
Marginal Revenue Product of Labor
Topic
Labor Supply and Demand Graphing
Difficulty
easy level question
Cognitive Level
understand
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