Given an 8 Percent Increase in Wages,firm a Cuts Back

question 42

Multiple Choice

Given an 8 percent increase in wages,firm A cuts back on labor more than firm B.It follows that,ceteris paribus,

• A) there are fewer substitutes for labor in firm B than A.
• B) there are fewer substitutes for labor in firm A than B.
• C) sunk costs are greater for firm A than B.
• D) the demand for the product that firm A produces is less elastic than the product that firm B produces.
• E) a and d

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Definitions:

Units

Basic quantities or measures adopted to quantify and measure goods, services, or any other items.

Production Function

A mathematical representation that explains how inputs in production are related to the goods or services produced.

Proportions

Ratios or fractions that express the relationship of one part to another or to the whole with respect to quantity, size, or amount.

Profit

The financial gain achieved when the revenue from business activities exceeds the expenses, costs, and taxes needed to sustain the activity.