Immobility of labour may lead to a misallocation of resources and market failure because
- It decreases unemployment rates
- The education and training needed to reduce labour immobility is a public good
- It prevents workers from moving to areas with better job opportunities, causing inefficiencies
- The immobility of factors of production is a negative externality in production
Answer
C. It prevents workers from moving to areas with better job opportunities, causing inefficiencies
This is due to geographical mobility, labour is immobile and workers may not be able to move to areas where there is a higher demand for their skills or where there are more job opportunities. This can result in a situation where there are labour shortages in some regions while other regions experience high unemployment rates. Resources are not efficiently allocated across different sectors and regions of the economy