If a Firm Incurs High Fixed Costs to Adjust Employment

question 24

Multiple Choice

If a firm incurs high fixed costs to adjust employment but there is almost no effect on the MRP of labor,the firm faces

• A) a positive labor demand elasticity.
• B) linear adjustment costs.
• C) concave adjustment costs.
• D) convex adjustment costs.
• E) lumpy adjustment costs.

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Definitions:

Economic Profit

The disparity between total monetary gains and overall financial outlay, accounting for both clear and obscure costs.

Monopoly Model

A market structure where a single firm dominates the market, with no close substitutes for its product.

Equilibrium

A market scenario where the balance between supply and demand stabilizes prices.

Profit-Maximizing Quantity

The manufacturing level where an enterprise attains its greatest possible earnings.