Final answer:
If the wage falls, firms will hire more workers because more workers will have a marginal product of labor that exceeds the wage. Lower wages mean the marginal cost of labor is reduced for firms, encouraging them to hire more until the marginal product of labor equals the wage.
Step-by-step explanation:
If the wage falls, firms will hire more workers because more workers will have a marginal product of labor that exceeds the wage. This is based on the economic principle that firms will continue to hire workers up to the point where the marginal product of labor equals the wage. When the wage decreases, the marginal cost of hiring an additional worker drops, so a firm can hire additional workers until the marginal product of labor again equals the new, lower wage.
With reference to unions, a higher union wage (Wu) can reduce the demand for labor, resulting in the hiring of fewer workers compared to the original equilibrium wage. However, when wages fall, the opposite is likely to occur. Firms will have an incentive to hire more workers as they will be paying less for each additional unit of labor, and more workers will be willing to work at the lower wage, given that the value they bring (marginal product of labor) will be more likely to exceed their cost to the firm.