Suppose a change in health care laws increases the cost of hiring an employee.We can expect output in the short run to ________ and output in the long run to ________.
A) be unaffected; be unaffected
B) decrease; decrease
C) decrease; be unaffected
D) decrease; increase
E) increase; increase

Question

Quizplus · Accepted Answer

In the short run, the increase in cost of hiring an employee will lead to a decrease in output as firms will try to maintain their profits by reducing their production. However, in the long run, firms can adjust their operations, such as investing in technology or restructuring their workforce, to overcome the cost increase and increase output. Therefore, output in the long run is likely to be unaffected.

Suppose a Change in Health Care Laws Increases the Cost