Question

Suppose that the supply of workers in an industry is perfectly inelastic. The nation allows a huge increase in immigration, which increases the number of workers entering this industry. This will cause ______________ and the marginal revenue product of labor to ______________.

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a wages to increase; increase
b wages to decrease; decrease
c no change in wages; not change
d wages to increase; decrease
e wages to decrease; increase

Answer 1

An increased number of workers will cause wages to decrease and the marginal revenue product of labor to increase.

Step-by-step explanation:

An increased number of workers in an industry with a perfectly inelastic supply of workers, caused by a huge increase in immigration, will cause wages to decrease and the marginal revenue product of labor to increase. When the supply of workers is perfectly inelastic, the industry cannot easily adjust to changes in the number of workers, leading to a decrease in wages. However, the increased number of workers entering the industry can still increase the output and productivity, resulting in an increase in the marginal revenue product of labor.