If the Labour Market Is Perfectly Competitive, Labour Demand Function

question 6

Multiple Choice

If the labour market is perfectly competitive, labour demand function is given by ND = a + bW and labour supply function is given by NS = c + dW; W is the wage rate. At market equilibrium, we can determine the market wage rate as:

• A) (a + c)/(d + b).
• B) (a - c)/(d - b).
• C) (a + c)/(d - b).
• D) (a - c)/(d + b).
• E) (d + b)/(a + c).

---

Definitions:

Marginal Efficiency

The expected profitability of investing in additional units of capital, influencing a firm's decision to invest based on future returns.

Net Investment

The total spending on new capital minus the depreciation on existing capital, indicating the growth of a company's or nation's capital stock.

Inventory Investment

The stock of goods or merchandise kept by a business with the intent to sell it for profit.

Depreciation

A measure of the decrease in value of an asset over time, often due to wear and tear or obsolescence.