Final answer:
An increase in labor supply typically results in a decrease of both MPL and VMPL. The MPL diminishes due to diminishing returns and VMPL declines when more labor is added and market price remains constant. The wage firms will pay to attract workers is determined by the intersection of labor demand and supply.
Step-by-step explanation:
When the labor supply shifts out, meaning it increases, this generally affects the Marginal Product of Labor (MPL) and the Value of the Marginal Product of Labor (VMPL) in different ways. Since the MPL is the additional output generated by one extra unit of labor, and is typically diminishing, an increase in labor supply might initially increase overall output but will reduce the MPL due to diminishing returns.
The VMPL, which is the marginal product of labor times the market price of the output, will also typically decrease as more labor is added, assuming the price of output does not increase. This is because, in a competitive output market, firms take the market price as given, and as they employ additional labor, the MPL declines, thus decreasing the VMPL.
If the firm is profit-maximizing, it will hire labor up to the point where Demand for Labor equals VMPL (or Marginal Revenue Product, MRP) equals Marginal Cost of Labor (MCL). This intersection determines the wage firms will pay to attract workers (Lm) and ultimately affects the VMPL and MPL indicators.