Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
By government regulation
B
By the demand and supply of labor
C
By the negotiation of union contracts
D
By the worker's skills alone
Understanding the Answer
Let's break down why this is correct
Answer
In a perfectly competitive labor market, the wage for workers is determined by the interaction of supply and demand. Employers want to hire workers as long as the value of what those workers produce is greater than the wage they pay. On the other hand, workers are willing to work for a wage that reflects their skills and the number of available jobs. When many workers are looking for jobs and there are many employers, wages tend to stabilize at a point where the number of workers employers want to hire equals the number of workers looking for jobs. For example, if there are many companies needing workers for a busy season, they may offer higher wages to attract more applicants, which can adjust the overall wage in the market.
Detailed Explanation
Wages are set by the balance of how many workers want jobs and how many jobs are available. Other options are incorrect because Some might think the government decides wages; It's a common belief that unions set wages through contracts.
Key Concepts
wage determination
Topic
Profit Maximization in Labor Markets
Difficulty
easy level question
Cognitive Level
understand
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