Refer to the Information Provided in Figure 10

question 66

Multiple Choice

Refer to the information provided in Figure 10.3 below to answer the questions that follow. Figure 10.3
-Refer to Figure 10.3. The market wage is initially W0 and the firm is initially at Point A. Labor supply decreases from S0 to S1. The firm's MRPL curve will shift from MRPL at K1 to MRPL at K2 because

• A) the factor substitution effect will cause the firm to substitute capital for the higher-priced labor.
• B) the supply of labor decreased, and therefore the productivity of labor decreased.
• C) the output effect led to a decrease in the demand for capital, which in turn decreased the productivity of labor.
• D) the firm is no longer maximizing profits.

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