Scenario 14.1
A worker in Firm A earns an income of $5,000 per month. He has been offered a job in Firm B where he will be paid a salary of $7,000 per month.
-If government-assured medical and other benefits increase the labor costs, everything else remaining constant, then firms will tend to hire more of the other resources instead of labor.

Question

Quizplus · Accepted Answer

When labor costs increase due to additional expenses like government-assured medical and other benefits, firms may seek cost-effective alternatives, such as automation or outsourcing, to maintain profitability, thus hiring less labor.

Scenario 14.1 A Worker in Firm a Earns an Income of $5,000