Exhibit 27-5 -Refer to Exhibit 27-5. In case (3), with a rise in the wage rate from W₁ to W₂, the wage bill will rise if A)Q₁ x W₃ Q₂ x W₁. B)(Q₃ - Q₂) x W₃ Q₁ x W₁. C)(W₂-W₁) x Q₂ (Q₁ - Q₂) x W₁. D)(W₂ - W₃) x Q₂ (W₂ - W₃) x (Q₃ - Q₂).

Question

Exhibit 27-5 -Refer to Exhibit 27-5. In case (3), with a rise in the wage rate from W₁ to W₂, the wage bill will rise if A)Q₁ x W₃ > Q₂ x W₁. B)(Q₃ - Q₂) x W₃ > Q₁ x W₁. C)(W₂-W₁) x Q₂ > (Q₁ - Q₂) x W₁. D)(W₂ - W₃) x Q₂ > (W₂ - W₃) x (Q₃ - Q₂).

Quizplus · Accepted Answer

The wage bill will rise if the increase in the wage rate multiplied by the new quantity of labor is greater than the decrease in the quantity of labor multiplied by the old wage rate. This is correctly represented in option C, where the left side calculates the increase in total wages paid due to the higher wage rate, and the right side calculates the loss in wages paid due to the reduced employment, using the initial wage rate.

Exhibit 27-5 ​

Exhibit 27-5