An Increase in the Wage Rate Will Have a Greater

question 11

Multiple Choice

An increase in the wage rate will have a greater effect on average costs

• A)the larger the proportion labor costs are of total costs and the easier it is to substitute capital for labor.
• B)the larger the proportion labor costs are of total costs and the harder it is to substitute capital for labor.
• C)the greater is the diminishing marginal product of labor.
• D)the greater are returns to scale.

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Definitions:

Expenses

Costs incurred by a business in the process of earning revenue.

Revenues

Total financial earnings of a company derived from its key operational processes, including the sale of products or services.

Equity

The value of the shares issued by a company, representing the ownership interest in the company's assets after liabilities are subtracted.

Accounts Payable

The short-term liabilities or obligations a company owes to its suppliers or creditors for goods and services received.