The figure shows the equilibrium in the Labor Market. If wage is w1, there is excess supply in the labor market. This means some workers who want to work at this wage level will be unable to find a job (unemployment). As a result, the wage will be driven down. On the other hand, if wages are as low as w2, workers do not want to work that much but firms demand more workers. So, there will be excess demand and the wage will increase. w* is the equilibrium or market-clearing wage where labor demand is equal to labor supply. At this wage level, L* is the amount of labor to be employed. In other words, if there is an imbalance in the labor market, wage adjusts and brings the market to an equilibrium. The correct answer is B.