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 forces of supply and demand. Employers want to hire workers as long as the value produced by those workers is greater than the wage they pay. When many workers are available, the supply of labor is high, which can lower wages. Conversely, if there are fewer workers available, the demand for their labor can drive wages up. For example, if a tech company needs software engineers and there are not many available, they may offer higher salaries to attract the talent they need.
Detailed Explanation
Wages are set by how many workers are needed and how many want to work. 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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