Exhibit 27-5 Refer to Exhibit 27-5. In case (1), with a rise in the wage rate from W₁ to W₂, the wage bill will fall if A)(Q₁ - Q₂)x W₁ (W₂ - W₁)x Q₂. B)(Q₃ - Q₂)x W₃ (W₂ - W₃)x Q₂. C)W₂ x Q₂ Q₃ x W₁. D)(W₁ - W₃)x Q₂ (W₂ - W₁)x Q₂.

Question

Exhibit 27-5 Refer to Exhibit 27-5. In case (1), with a rise in the wage rate from W₁ to W₂, the wage bill will fall if A)(Q₁ - Q₂)x W₁ > (W₂ - W₁)x Q₂. B)(Q₃ - Q₂)x W₃ > (W₂ - W₃)x Q₂. C)W₂ x Q₂ > Q₃ x W₁. D)(W₁ - W₃)x Q₂ > (W₂ - W₁)x Q₂.

Quizplus · Accepted Answer

The formula for calculating the change in wage bill due to a change in wage rate is (QS2-QS1)xWS1. In this case, the initial wage rate is W₁ and the final wage rate is W₂. Therefore, the change in wage rate is W₂ - W₁. To determine if the wage bill will fall, we need to compare the product of the change in quantity of labor (Q₁ - Q₂) and the initial wage rate (W₁) with the product of the change in wage rate and the final quantity of labor (Q₂). Therefore, the correct formula is (Q₁ - Q₂)x W₁ > (W₂ - W₁)x Q₂.

Exhibit 27-5 ​ Refer to Exhibit 27-5. in Case (1), with a Rise

Exhibit 27-5 Refer to Exhibit 27-5. in Case (1), with a Rise