Question

When the supply of labor increases, according to the specific factors model, which of the following is likely to happen?

A.) The marginal product of labor increases in all industries

B.) The rental return to both specific factors will increase

C.) The number of workers employed will decrease

D.) The overall wage in the economy increases in the short run

Answer 1

ANSWER-

When the supply of labor increases, according to the specific factors model then the number of wokers employed decreases because when supply increases the wage rate will rise and when wage rate rises the employer emplyee less workers which will cause the marginal product of labor to shift to right.

Therefore, When the supply of labor increases, according to the specific factors model, these all are likely to happen.

(A)  The marginal product of labor increases in all industries.

(C) The number of workers employed will decrease.

(D) The overall wage in the economy increases in the short run.