A company succumbs to a wage increase demand without any changes in the productivity of labor, price of the product, and the total output sold.Which of the following would happen?
A)Total revenue of the company will fall.
B)Investment by the company will increase.
C)Profit per unit of the product will fall.
D)Average profit per unit will increase.

Question

Quizplus · Accepted Answer

If the company succumbs to a wage increase demand without any changes in the productivity of labor, price of the product, and the total output sold, the cost of production will increase without any increase in revenue. This will decrease the profit per unit of the product as the cost of making each unit has increased without any increase in revenue. Therefore, answer C is the most appropriate choice. The total revenue of the company will remain the same, investment by the company is unlikely to increase without any increase in revenue, and the average profit per unit will not increase due to the increased cost of production.

A Company Succumbs to a Wage Increase Demand Without Any