Figure 18-7 -Refer to Figure 18-7. When the relevant labor supply curve is S₁, and the labor market is in equilibrium, the A)wage is W₁. B)opportunity cost of leisure to workers is W₁. C)value of the marginal product of labor to firms is W₁. D)All of the above are correct.

Question

Quizplus · Accepted Answer

At equilibrium, the wage rate is determined by the intersection of the labor demand curve and the labor supply curve, which in this case is at point E where the wage rate is W₁. This is the answer to option A. The opportunity cost of leisure is the wage rate that workers have to give up in order to work one more hour. In this case, the opportunity cost of leisure is also W₁ since that is the wage rate workers receive by working. This is the answer to option B. The value of the marginal product of labor to firms is the additional revenue earned by the firm from hiring one more unit of labor. At equilibrium, this value is equal to the wage rate. In this case, the value of the marginal product of labor is also W₁. This is the answer to option C. Therefore, all options (A), (B), and (C) are correct, making option (D) the best answer.

Figure 18-7 -Refer to Figure 18-7. When the Relevant Labor Supply Curve