If employers are provided a subsidy of $1 per hour for hiring workers,________.
A) the equilibrium employment will increase
B) the equilibrium real wage will decrease
C) labor supply will increase
D) labor demand will decrease

Question

Quizplus · Accepted Answer

Providing a subsidy for hiring workers will increase the demand for labor, shifting the labor demand curve to the right. This will increase both equilibrium employment and equilibrium wage rate. Therefore, the correct choice is A, which states that the equilibrium employment will increase. Choices B, C, and D are incorrect.

If Employers Are Provided a Subsidy of $1 Per Hour