Suppose that the labor market for life guards is initially in equilibrium. Whistles are an important safety tool that life guards use as a part of their jobs. A fire destroys the largest factory that produces whistles. In the market for life guards the equilibrium wage
A)increases because the marginal productivity of life guards increases.
B)decreases because the marginal productivity of life guards decreases.
C)increases because the supply of life guards increases.
D)decreases because the supply of life guards decreases.

Question

Quizplus · Accepted Answer

The destruction of the factory that produces whistles would decrease the marginal productivity of life guards since they are now unable to use this important safety tool. As a result, the demand for life guards would decrease, leading to a decrease in the equilibrium wage.

Suppose That the Labor Market for Life Guards Is Initially