Question

The following are true statements related to the Demand for Labor, EXCEPT: A: The demand for...

The following are true statements related to the Demand for Labor, EXCEPT:

A: The demand for labor is a reflection of the Value of Marginal Productivity of Labor (VMPL) when the marginal productivity is already in decline.

B: From the firm's view, the optimal level of labor demanded is the one when the VMPL is maximized.

C: The necessary and sufficient conditions for optimality on the demand for labor are: (i) VMPL = W* and (ii) MPL is deceasing.

D: The Demand for Labor will shift up if the productivity of labor increases due to a technological innovation.

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Answer #1

Option b is not correct

the optimal hiring rule indicates that the value of the marginal product of labour should be equal to the wage rate irrespective of whether it is maximized or not. the demand for labour function is basically the value of marginal productivity of labour function where are the productivity of labour is generally declining for labour. Also note that technological advancement increases the marginal productivity of labour which will increase the value of marginal productivity of labour as well. This will shift the demand for labour function up. Hence option a option c and option d are correct.

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