An increase in the supply of labor
A)increases the equilibrium wage and increases the value of the marginal product of labor.
B)increases the equilibrium wage and decreases the value of the marginal product of labor.
C)decreases the equilibrium wage and increases the value of the marginal product of labor.
D)decreases the equilibrium wage and decreases the value of the marginal product of labor.

Question

Quizplus · Accepted Answer

When there is an increase in the supply of labor, it creates a surplus of labor, resulting in increased competition for available jobs. As a result, the equilibrium wage decreases. Additionally, with more workers, the marginal product of labor decreases since there are more workers producing the same amount of output, which decreases the value of the marginal product of labor. Therefore, option D is the best choice.

An Increase in the Supply of Labor