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The Figures Below Give the Production Schedule and the Product

Question 28

Multiple Choice

The figures below give the production schedule and the product demand schedule for a firm, which has to decide how many workers to hire. Workershired0123456TotalPhysicalProduct0101825303437Price ofoutput$10$10$10$10$10$10$10\begin{array}{c}\begin{array}{lll}\\\text {Workers}\\\text {hired}\\0\\1\\2\\3\\4\\5\\6\end{array}\begin{array}{lll}\text {Total}\\\text {Physical}\\\text {Product}\\0\\10\\18\\25\\30\\34\\37\end{array}\begin{array}{lll}\text {Price of}\\\text {output}\\\$10\\\$10\\\$10\\\$10\\\$10\\\$10\\\$10\\\end{array}\end{array}
-Which of the following is correct regarding the elasticity of labour demand?


A) If the share of the labour costs in total costs is large, the derived demand for labour will be inelastic.
B) If the product demand is elastic, the derived demand for labour will be inelastic.
C) If the supply of substitute inputs is inelastic, the derived demand for labour will be inelastic.
D) If capital and labour are easily substitutable, the derived demand for labour will be inelastic.
E) None of the choices are correct.

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