Given an 8 Percent Increase in Wages, Firm a Cuts

question 161

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

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Definitions:

Underweight Information

Information that is given less significance or consideration than is warranted by its importance or relevance.

Guided Interview

A method of data collection in research or hiring processes where the interviewer follows a set list of questions but is free to explore topics that arise during the conversation.

Contrast Effect

A cognitive bias in which the evaluation of something is influenced by comparisons with other similar entities that differ in some aspects.

Contrast Effect

The enhancement or diminishment of perception, judgment, or behavior resulting from comparisons with recently encountered contrasting or dissimilar stimuli.