The Size of the Reduction in Quantity of Labor Hired

question 32

Multiple Choice

The size of the reduction in quantity of labor hired by a firm due to an increase in the wage rate depends upon all of the following except

• A)what percentage of total costs are made up of labor costs.
• B)how much quantity demanded in the output market will be reduced by a higher price.
• C)the capital to labor ratio before the wage increase.
• D)how easily other inputs can be substituted for labor.

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Definitions:

CPI

Stands for Consumer Price Index, a measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food, and medical care.

CPI

The Consumer Price Index tracks the average variation in prices that urban consumers pay for a selection of consumer goods and services over a period of time.

Escalating Inflation

A situation where the rate at which the general level of prices for goods and services is rising, and subsequently, purchasing power is falling, accelerates over a period.

CPI

The Consumer Price Index measures the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.