Suppose an increase in the demand for labor results in an increase of $4 per hour in the equilibrium wage. How does the increase in the demand for labor affect the value of the marginal product of labor (VMPL)?
A)The VMPL increases by less than $4.
B)The VMPL increases by $4.
C)The VMPL increases by more than $4.
D)The VMPL decreases by $4.

Question

Quizplus · Accepted Answer

According to the law of demand, when the demand for labor increases, the equilibrium wage increases. This means that the value of the marginal product of labor (VMPL) must also increase by the same amount as the increase in the wage rate ($4 per hour). Therefore, the increase in the demand for labor affects the VMPL by increasing it by $4.

Suppose an Increase in the Demand for Labor Results in an Increase