The figure depicts a labor market. Now consider an inflow of half a million immigrant workers who are all looking for employment (rather than intending to start up a business). Whi... The figure depicts a labor market. Now consider an inflow of half a million immigrant workers who are all looking for employment (rather than intending to start up a business). Which of the following statements is correct?
Understand the Problem
The question describes a labor market scenario where there is an inflow of half a million immigrant workers seeking employment. The question asks us ti identify the correct statement regarding the impact on the labor market, considering factors like wage-setting, labor supply, and potential unemployment.
Answer
The firms' marginal cost of production is temporarily reduced.
The correct answer is: The firms' marginal cost of production is temporarily reduced.
Answer for screen readers
The correct answer is: The firms' marginal cost of production is temporarily reduced.
More Information
An increase in the labor supply, due to immigration, increases the competition for jobs. This can lead to a temporary reduction in wages, which in turn reduces the firms' marginal cost of production.
Tips
Consider the immediate impact of increased labor supply on wages and firms' costs.
Sources
- Module 2 chapter 9 10 13 flashcards - Quizlet - quizlet.com
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