Other Things Equal, the Relationship Between the Relative Importance of a Given

question 222

Multiple Choice

Other things equal, the relationship between the relative importance of a given type of labor in a firm's total costs and the elasticity of demand for that labor is such that the

• A) demand for labor will be elastic only if labor accounts for less than 50 percent of total costs.
• B) demand for labor will be elastic only if labor accounts for 50 percent or more of total costs.
• C) larger the labor cost to total cost ratio, the smaller will be the elasticity of labor demand.
• D) larger the labor cost to total cost ratio, the greater will be the elasticity of labor demand.

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Definitions:

Total Product

The total quantity of output produced by a firm or economy, resulting from the use of given inputs over a specific period.

Marginal Cost

The cost incurred by producing one additional unit of a product or service.

4th Worker

The concept or individual representing the fourth hire in a sequence, often associated with incremental contribution or changes in team dynamics.

Short Run

A period of time in economics during which at least one input, like plant size, is fixed and cannot be changed.