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Question
Microeconomics
Posted 9 months ago
Capital and labor are complementary in the production of chupacabra figurines. Assume factor markets are perfectly competitive.
Which of the following decreases the demand for labor?
Choose 1 answer:
(A) The cost of capital decreases
(B) The demand for chupacabra figurines decreases.
(c) Worker productivity increases
D An increase in the wage rate for workers in other labor markets
(E) A decrease in the wage rate
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Answer from Sia
Posted 9 months ago
Solution
a
Complementary Factors: Capital and labor are complementary in the production of chupacabra figurines. This means that an increase in the use of one factor (capital) will increase the productivity of the other factor (labor)
b
Decrease in Demand for Labor: If the demand for chupacabra figurines decreases, the overall production will decrease. This will lead to a decrease in the demand for both capital and labor
c
Worker Productivity: An increase in worker productivity would typically increase the demand for labor, as more output can be produced with the same amount of labor
d
Wage Rate in Other Markets: An increase in the wage rate for workers in other labor markets would make labor in the chupacabra figurine market relatively cheaper, potentially increasing the demand for labor in this market
e
Wage Rate Decrease: A decrease in the wage rate would make labor cheaper, potentially increasing the demand for labor
Answer
(B) The demand for chupacabra figurines decreases.
Key Concept
Demand for labor is derived from the demand for the product it helps to produce.
Explanation
When the demand for chupacabra figurines decreases, the production of these figurines will also decrease, leading to a lower demand for labor.
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