Question

In: Economics

To say that a firm is competitive in the labor market is to say that the...

To say that a firm is competitive in the labor market is to say that the firm can choose

a.

the wage it pays its workers, but it cannot choose how many workers to hire.
b.

the number of workers it hires, but it cannot choose the wage it pays its workers.
c.

both the wage it pays its workers and the number of workers it hires.
d.

neither the wage it pays its workers nor the number of workers it hires.

Solutions

Expert Solution

The correct option is B) the number of workers it hires, but it cannot choose the wage it pays its workers.

The labor market is the term that economists use for all the different markets for labor. In a perfectly competitive labor market, firms can hire all the labor they want at the going market wage. Therefore, they hire workers up to the point L1 where the going market wage equals the value of the marginal product of labor.

Rahul Sunny answered 2 years ago
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