Product market comparisons that focus on labor costs are likely to deserve greater weight when
A)product demand is inelastic.
B)the supply of labor is elastic.
C)attracting and retaining qualified employees is difficult.
D)the costs of recruiting replacements are high.
E)labor costs represent a large share of total costs.

Question

Quizplus · Accepted Answer

When labor costs represent a large share of total costs, comparing product markets based on labor costs can have a significant impact on overall profitability. This is particularly true if there are no significant differences in other costs such as materials or overhead. In such situations, even small differences in labor costs can have a significant impact on overall costs and profitability.

Product Market Comparisons That Focus on Labor Costs Are Likely