An increase in the demand for houses
A)increases the equilibrium wage of carpenters and increases the value of carpenters' marginal product of labor.
B)increases the equilibrium wage of carpenters and decreases the value of carpenters' marginal product of labor.
C)decreases the equilibrium wage of carpenters and increases the value of carpenters' marginal product of labor.
D)decreases the equilibrium wage of carpenters and decreases the value of carpenters' marginal product of labor.

Question

Quizplus · Accepted Answer

When there is an increase in the demand for houses, the demand for carpenters (who are involved in the construction of houses) also increases. This, in turn, increases the equilibrium wage of carpenters as they become more valuable in the market. Additionally, the value of carpenters' marginal product of labor, which is the additional output produced by one more unit of labor, also increases as they are in higher demand. Therefore, Choice A is the correct answer.

An Increase in the Demand for Houses