Figure 18-10 -Refer to Figure 18-10. When the relevant labor demand curve is D₁ and the labor market is in equilibrium, A)the value of the marginal product of labor to firms is less than W₁. B)the opportunity cost of leisure to workers is greater than W₁. C)the wage is W₁. D)All of the above are correct.

Question

Quizplus · Accepted Answer

At equilibrium, the wage rate is determined where the labor demand curve intersects with the labor supply curve, which is at point E. Therefore, the wage rate is W₁. The value of the marginal product of labor to firms is equal to the wage rate at equilibrium, so it is also W₁. The opportunity cost of leisure to workers is the wage rate they could have earned if they had worked instead of choosing leisure, which is also W₁ at equilibrium. Therefore, only choice C is correct.

Figure 18-10 -Refer to Figure 18-10. When the Relevant Labor Demand Curve