Firm A has a higher labor cost-total cost ratio than Firm B. If both firms employ the same type of labor, and the wage rate rises by $1, then Firm A's product price will most likely ____________ than Firm B's product price.

Question

Quizplus · Accepted Answer

Since Firm A has a higher labor cost-total cost ratio than Firm B, an increase in the wage rate will have a larger impact on Firm A's total costs. Therefore, to maintain profitability, Firm A is more likely to increase its product price by more than Firm B.

Firm a Has a Higher Labor Cost-Total Cost Ratio Than