📚 Learning Guide
Profit Maximization in Labor Markets
easy

What happens to the supply of labor when wages increase in a competitive labor market?

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Learning Path

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Choose the Best Answer

A

Labor supply decreases

B

Labor supply remains constant

C

Labor supply increases

D

Labor supply becomes inelastic

Understanding the Answer

Let's break down why this is correct

Answer

When wages increase in a competitive labor market, the supply of labor typically goes up. This happens because higher wages attract more people to seek jobs, as they can earn more money for their work. For example, if a factory raises its pay for workers, more individuals may apply for those positions, including people who were previously not interested in that kind of job. As a result, the number of workers available increases, which helps employers find the labor they need. Overall, higher wages make work more appealing, leading to a larger supply of labor in the market.

Detailed Explanation

When wages go up, more people want to work. Other options are incorrect because Some might think that higher wages scare people away from jobs; It's a common mistake to think wages don't change anything.

Key Concepts

labor supply
Topic

Profit Maximization in Labor Markets

Difficulty

easy level question

Cognitive Level

understand

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