Final answer:
The true statement of frictionless labor markets is that firms can instantly hire and fire workers. Such markets operate under the supply-and-demand model reaching an equilibrium where labor supply equals labor demand.
Step-by-step explanation:
In frictionless labor markets, the accurate statement is that firms can instantly hire and fire workers. A frictionless market assumes no transaction costs and allows for perfect flexibility and mobility of labor.
In such a scenario, firms respond quickly to changes in demand and supply conditions by adjusting employment levels accordingly.
When we look at the supply-and-demand model of a perfectly competitive labor market, these markets reach an equilibrium where the wage rate (We) and quantity of labor (Qe) are balanced, meaning the labor supplied by workers is equal to the labor demanded by employers.
This equilibrium negates options A, B, and D, as paying below-equilibrium wages, having a surplus of labor supply, or having labor demand perpetually exceed supply are all inconsistent with the concept of a frictionless labor market.
In frictionless labor markets, firms can instantly hire and fire workers. This means that the quantity of labor demanded always exceeds the quantity of labor supplied. In such markets,
firms face a horizontal supply curve for labor, meaning they can hire as much labor as they want at the going market wage.