Suppose the supply of labor schedule increases in a perfectly competitive labor market while the market demand schedule remains unchanged. A profit-maximizing representative firm will
A) hire more workers.
B) hire fewer workers.
C) hire the same number of workers.
D) substitute capital for labor.

Question

Quizplus · Accepted Answer

When the supply of labor increases in a perfectly competitive labor market, and demand remains unchanged, the equilibrium wage rate falls. A profit-maximizing firm will respond to the lower wage by hiring more workers, as labor has become cheaper.

Suppose the Supply of Labor Schedule Increases in a Perfectly