Question

Scenario 18-6 Rocchetta Industries manufactures and supplies bottled water in Mexico. As a result of a contamination of water supplies at many of Mexico's resort communities, the demand for bottled water has increased. Refer to Scenario 18-6. When the labor market adjusts to its new equilibrium, we would expect the

a. wages of Rocchetta workers to be lower than they were before the increase in demand for bottled water.

b. value of the marginal product of labor to be higher than it was before the increase in demand for bottled water.

c. marginal product of labor to be higher than it was before the increase in demand for bottled water.

d. price of bottled water to be lower than it was before the increase in demand for bottled water.

Answer 1

As a result of a contamination of water supplies at many of Mexico's resort communities ,the demand for bottles water has increased. When the labor market adjusts to its new equilibrium ,we would expect the value of the marginal product of labor to be higher than it was before the increase in bottled water. Because when demand increases, price of bottled increases ,which will increase the Value of MPL which is (P)(MPL) .Hence,option(B) is correct.