Refer to the information provided in Figure 10.3 below to answer the question(s) that follow. Figure 10.3
-Refer to Figure 10.3. The market wage is initially W₀ and the firm is initially at Point A. Labor supply decreases from S₀ to S₁. If the firm does not change the amount of capital it employs, the firm will move to Point ________ to maximize profits.

Question

Refer to the information provided in Figure 10.3 below to answer the question(s) that follow.

Figure 10.3
-Refer to Figure 10.3. The market wage is initially W₀ and the firm is initially at Point A. Labor supply decreases from S₀ to S₁. If the firm does not change the amount of capital it employs, the firm will move to Point ________ to maximize profits.

Quizplus · Accepted Answer

When labor supply decreases, the wage rate increases. To maximize profits without changing capital, the firm will hire less labor, moving to Point B where the new labor supply curve intersects the firm's demand curve.

Refer to the Information Provided in Figure 10