Refer to the information provided in Figure 10.3 below to answer the question(s) that follow. 
Figure 10.3 Refer to Figure 10.3. The market wage is initially W1 and the firm is initially at Point B. Labor supply increases from S1 to S0. The firm?s MRPL curve will shift from MRPL at K2 to MRPL at K1 because
A. the firm is no longer maximizing profits.
B. the factor substitution effect will cause the firm to substitute capital for the lower-priced labor.
C. the output effect led to ann increase in the demand for capital, which in turn increased the productivity of labor.
D. the supply of labor increased and therefore the productivity of labor increased.
Answer: C
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