Which of the Following Could Be TRUE Given the Relationship

question 17

Multiple Choice

Which of the following could be TRUE given the relationship between a firm's layoffs and its payroll tax for unemployment insurance relative to those of an average firm?

• A) Firms with twice as many layoffs pay twice as much in payroll taxes.
• B) Firms with twice as many layoffs relative to the average firm pay 50% less in payroll taxes than the average firm.
• C) Firms with twice as many layoffs pay 40% more in payroll taxes than the average firm.
• D) Firms with twice as many layoffs pay more than twice as much in payroll taxes.

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Definitions:

Marginal Cost

The supplementary cost attached to the output of an additional product or service unit.

Diminishing Marginal Product

The principle stating that as one inputs more of a factor of production while holding other inputs constant, the added output produced from each additional unit of the variable input eventually decreases.

Fixed Costs

Fixed costs are business expenses that remain constant regardless of the level of production or sales, such as rent, salaries, or loan payments.

Marginal Cost

The added expense incurred by creating one more unit of a product or service.