Which of the following best describes the output effect of a wage decrease?
A)The firm's marginal cost increases,the firm desires to produce less output,and therefore less labor is required
B)The cost of labor is relatively higher causing the firm to use relatively less labor
C)The firm's marginal cost falls,the firm desires to produce more output,and therefore more labor is required
D)The firm's labor demand curve becomes more inelastic,causing it to employ less labor

Question

Quizplus · Accepted Answer

A decrease in wages reduces the firm's marginal cost of production, making it cheaper to produce additional units of output. As a result, the firm is incentivized to increase production, which typically requires more labor, assuming other factors remain constant.

Which of the Following Best Describes the Output Effect of a Wage