The first 3 columns of the following table show data for a representative firm in an industry.The last 3 columns show the market demand and supply for the type of labour employed by this firm.

-What will be the effect if an economy experiences growth in its labour productivity over a period of years?
A)The marginal revenue product of labour will decrease and,graphically,the demand for labour curve will shift to the right.
B)The marginal revenue product of labour will increase and,graphically,the demand for labour curve will shift to the right.
C)The marginal revenue product of labour will increase and,graphically,the supply of labour curve will shift to the left.
D)The marginal revenue product of labour will increase and,graphically,the supply of labour curve will shift to the right.

Question

The first 3 columns of the following table show data for a representative firm in an industry.The last 3 columns show the market demand and supply for the type of labour employed by this firm.
 
-What will be the effect if an economy experiences growth in its labour productivity over a period of years?
A)The marginal revenue product of labour will decrease and,graphically,the demand for labour curve will shift to the right. 
B)The marginal revenue product of labour will increase and,graphically,the demand for labour curve will shift to the right. 
C)The marginal revenue product of labour will increase and,graphically,the supply of labour curve will shift to the left. 
D)The marginal revenue product of labour will increase and,graphically,the supply of labour curve will shift to the right.

Quizplus · Accepted Answer

An increase in labour productivity will increase the marginal revenue product of labour, as each worker will be able to produce more output. This will shift the demand for labour curve to the right, as firms will demand more labour at each wage rate. The supply of labour curve will remain unchanged, as labour productivity is not directly related to the willingness of workers to supply labour. Thus, option B is the correct answer.

The First 3 Columns of the Following Table Show Data