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How would increased competition among employers in a labor market affect workers' wages? a. wages will go down because productivity is lower b....

The correct answer to this question is Option D.  We know that this is the correct answer because we know that an increase in demand will, ceteris paribus, lead to an increase in the price of a good or service.


If you follow the link below, you will find an interactive graph that shows what happens in a market when demand increases.  When demand increases, the demand curve moves to the right.  Assuming that supply does not also change, this leads to a higher price for the good or service in question. 


In this question, we have an increase in the demand for labor.  There is more competition for workers.  Assuming that the supply of workers does not change, this will lead to an increase in the price of labor.  Companies will have to raise the wages that they are willing to pay because, if they do not, they will not be able to attract or retain the best workers.  The best workers will go work for companies that pay more money.  For this reason, Option D is the correct answer.

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