Reducing Long-Run Labor Usage

Multiple Choice

Reducing Long-Run Labor Usage

The following questions refer to the accompanying diagram, which shows a firm reducing its long-run labor usage from L0 to L1 in response to an increase in the wage rate.


-Refer to Reducing Long-Run Labor Usage.The diagram illustrates the situation where

A) the long-run demand for labor is upward sloping.
B) the scale effect reinforces the substitution effect.
C) the higher wage raises the firm's long-run marginal costs.
D) labor is a regressive factor.