Consider the labor market for short-order cooks. An increase in the wages paid to fast-food workers will cause
A)both equilibrium wages and equilibrium employment to increase in the market for short-order cooks.
B)both equilibrium wages and equilibrium employment to decrease in the market for short-order cooks.
C)equilibrium wages to increase and equilibrium employment to decrease in the market for short-order cooks.
D)equilibrium wages to decrease and equilibrium employment to increase in the market for short-order cooks.

Question

Quizplus · Accepted Answer

An increase in wages paid to fast-food workers will lead to an increase in the opportunity cost of working as a short-order cook, as workers may prefer to work in the fast-food industry instead. This will lead to a decrease in the supply of labor in the market for short-order cooks, causing the equilibrium wages to increase but the equilibrium employment to decrease.

Consider the Labor Market for Short-Order Cooks