In the context of quasi-fixed labour costs, the "buffer" refers to a gap between the value of the marginal revenue product of a worker and his/her wage. Which of the following statements is false?

Question

Quizplus · Accepted Answer

The buffer refers to the gap between the value of the marginal revenue product of a worker and his/her wage, and it is indeed consistent with labour hoarding behaviour, where firms retain more workers than necessary during downturns due to the high costs of hiring and training new employees. This buffer also explains why employment might not rise or fall as much in response to changes in labour demand, as firms are willing to absorb some of the cost fluctuations due to the presence of quasi-fixed labour costs. Therefore, none of the statements A, B, C, or D are false; they all accurately describe aspects of the buffer in the context of quasi-fixed labour costs.

In the Context of Quasi-Fixed Labour Costs, the "Buffer" Refers