Economics (AS & A Level) · Oct / Nov 2024 · Paper 31 · Question 15

In the diagram, D represents the long-run demand curve for labour in a firm operating in an imperfect market. When there is a fall in the amount of capital invested per worker, the marginal revenue productivity of labour (MRP) curve shifts from MRP1 to MRP2. How does this shift affect the amount of labour employed in the long run, when wages fall?

1. AIt falls from L3 to L2.
2. BIt increases from L1 to L2.
3. CIt increases from L2 to L3.
4. DIt remains the same at L1.

As printed in the paper