Regional Labor Mismatch and Unemployment Costs

Steps:

• Identify the issue: Unemployed workers in one region cannot fill vacancies in another due to geographical barriers.
• Analyze cost factors: Unemployment persists if workers avoid moving, keeping local labor supply high and wages low.
• Link to living expenses: Higher costs in the job-rich area discourage relocation, sustaining unemployment.
• Conclude: This immobility lowers overall employment costs by preventing wage inflation from shortages.

Why B is correct:

• Higher living costs in the job area create geographical immobility, a form of frictional unemployment that suppresses wages by maintaining excess local labor supply (per labor economics definition).

Why the others are wrong:

• A: Restates the premise without explaining why costs are lower.
• C: Skill uniformity does not address regional mismatches or cost reductions.
• D: Increased mobility would fill vacancies and raise wages, not lower costs.

Final answer: B