If Labor Is 80 Percent of Total Costs in Industry

question 166

Multiple Choice

If labor is 80 percent of total costs in industry A and 20 percent in industry B, then other things equal, we would expect the elasticity of demand for labor to be

• A) greater in industry A than in industry B.
• B) greater in industry B than in industry A.
• C) the same in both industries.
• D) uncertain since no general relationship exists between cost shares and elasticities.

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