Consider an industry where both the product and labor market are perfectly competitive. Suppose there was...

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Consider an industry where both the product and labor market are perfectly competitive. Suppose there was an unexpected increase in wages by 10%. This reduced Firm A's labor demand by 5% and Firm B's labor demand by 8%. Based on this information, what can we deduce? (Choose one best answer) a) Firm A's labor demand is more elastic than Firm B's. b) Compared to Firm B, Firm A is more likely to have a production technology in which inputs have a higher degree of substitutability with labor. c) Firm A's labor demand is measured in the short run whereas Firm B's labor demand is measured in the long run. d) If a minimum wage legislation is imposed where the minimum wage rate is higher than the current market wage, Firm B's employment will decrease more than Firm A's. Briefly explain why you did not choose the remaining three statements. Consider an industry where both the product and labor market are perfectly competitive. Suppose there was an unexpected increase in wages by 10%. This reduced Firm A's labor demand by 5% and Firm B's labor demand by 8%. Based on this information, what can we deduce? (Choose one best answer) a) Firm A's labor demand is more elastic than Firm B's. b) Compared to Firm B, Firm A is more likely to have a production technology in which inputs have a higher degree of substitutability with labor. c) Firm A's labor demand is measured in the short run whereas Firm B's labor demand is measured in the long run. d) If a minimum wage legislation is imposed where the minimum wage rate is higher than the current market wage, Firm B's employment will decrease more than Firm A's. Briefly explain why you did not choose the remaining three statements.

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A Firm As labor demand is more elastic than Firm Bs Explanation Elasticity of demand measures the re... View the full answer