Table 18-B
Consider the following daily production data for MadeFromScratch, Inc. MadeFromScratch sells cupcakes for $3 each and pays the workers a wage of $325 per day.
-Refer to Table 18-11. Suppose that there is a technological advance that allows MadeFromScratch employees to produce more cupcakes than they could before. Because of this change, the firm's
A)demand for labor shifts right.
B)demand for labor shifts left.
C)supply of labor shifts right.
D)supply of labor shifts left.

Question

Table 18-B
Consider the following daily production data for MadeFromScratch, Inc. MadeFromScratch sells cupcakes for $3 each and pays the workers a wage of $325 per day. 
-Refer to Table 18-11. Suppose that there is a technological advance that allows MadeFromScratch employees to produce more cupcakes than they could before. Because of this change, the firm's
A)demand for labor shifts right. 
B)demand for labor shifts left. 
C)supply of labor shifts right. 
D)supply of labor shifts left.

Quizplus · Accepted Answer

With the technological advance that increases productivity, MadeFromScratch is able to produce more cupcakes at the same cost of labor. This means that the marginal product of labor has increased, making labor more valuable to the firm. As a result, the demand for labor shifts to the right, meaning that the firm is willing to hire more workers at a higher wage rate.

Table 18-B Consider the Following Daily Production Data for MadeFromScratch, Inc. MadeFromScratch