What happens in the labor market when the real wage rate is excessively high?

Show Answers

Labor demand surpasses labor supplyLabor demand matches labor supplyLabor demand falls short of labor supplyThe market quickly corrects to restore balance

Explanation

If the real wage is set too high, the quantity of labor demanded is less than the quantity supplied, causing an imbalance. Equilibrium occurs only when labor demand equals labor supply. Therefore, the correct scenario is that labor demand equals labor supply.