Suppose the Elasticity of Labor Demand Is 0

question 179

Multiple Choice

Suppose the elasticity of labor demand is 0.6. Then a decrease in the wage rate will

• A)decrease total wage income.
• B)increase total wage income.
• C)have no impact on total wage income.
• D)have an indeterminate impact on total wage income.

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Definitions:

Acid-test Ratio

A strict measure used to assess if a company possesses sufficient current assets to pay off its short-term obligations without the need to liquidate its stock.

Times Interest

A metric that evaluates a firm's capability to handle its debt responsibilities using its present earnings.

Equity Multiplier

A financial ratio that measures a company's use of debt financing by comparing total assets to shareholders' equity.

Working Capital

The difference between a company's current assets and current liabilities, indicating the available short-term assets to cover short-term debts.