Given a 10 Percent Increase in Wages, Firm a Cuts

question 114

Multiple Choice

Given a 10 percent increase in wages, firm A cuts back on labor more than firm B. It follows that, ceteris paribus,

• A)firm A likely has a higher labor cost-total cost ratio than firm B.
• B)firm B likely has a higher labor cost-total cost ratio than firm A.
• C)the elasticity of demand for labor is likely higher for firm B than firm A.
• D)firm B likely has higher fixed costs than firm A.
• E)firm A likely has higher per-unit costs than firm B.

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Definitions:

Efficient

When resources are used in a way that maximizes the production of goods and services without wasting any resources.

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A special cake prepared and decorated to celebrate someone's birthday.

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The increase in welfare or overall efficiency that arises from individuals or nations engaging in voluntary exchange or trade.

Increase in Total Output

A rise in the quantity of goods or services produced by an economy or firm.