Suppose that the labor market for life guards is initially in equilibrium. Then the marginal productivity of life guards increases. What happens to the equilibrium wage and quantity of life guards?
A)Both the equilibrium wage and quantity increase.
B)Both the equilibrium wage and quantity decrease.
C)The equilibrium wage increases, and the equilibrium quantity decreases.
D)The equilibrium wage decreases, and the equilibrium quantity increases.

Question

Quizplus · Accepted Answer

If the marginal productivity of life guards increases, it means that they are more productive and valuable to employers, and thus demand for them increases. This will lead to an increase in their equilibrium wage, as employers bid up the wage to attract more life guards. Additionally, more individuals will be incentivized to enter the life guarding industry, leading to an increase in the equilibrium quantity of life guards.

Suppose That the Labor Market for Life Guards Is Initially