In the Context of Quasi-Fixed Labour Costs, the "Buffer" Refers

question 3

Multiple Choice

In the context of quasi-fixed labour costs, the "buffer" refers to a gap between the value of the marginal revenue product of a worker and his/her wage. Which of the following statements is false?

• A) It is consistent with labour hoarding behaviour on the part of firms.
• B) When labour demand rises, employment might not rise by as much.
• C) When labour demand falls, employment might not fall by as much.
• D) The buffer is created by the presence of quasi-fixed labour costs.
• E) None of choices are correct.

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Definitions:

Interest Expense

Interest expense is the cost incurred by an entity for borrowed funds, typically reflected in the income statement as a financial cost over the borrowing period.

Income Statement

A financial statement that reports a company's financial performance over a specific accounting period, detailing revenues, expenses, and profits or losses.

Treasury Stock

Shares that were issued and then repurchased by the issuing company, reducing the amount of outstanding stock on the open market.

Owners' Equity

The residual interest in the assets of a company after deducting its liabilities, reflecting the capital invested by the owners plus retained earnings.