If the cost efficiency of labor equals 2,then
A)Labor costs 100 percent more than the revenue it generates.
B)The wage rate is 100 percent more than the product price.
C)Each extra dollar spent on wages returns 2 units of additional output.
D)The product price is 200 percent of the wage rate.

Question

Quizplus · Accepted Answer

A cost efficiency ratio of 2 means that for every dollar spent on labor, the company is generating $2 in additional output. Therefore, each extra dollar spent on wages returns 2 units of additional output. The other answer choices are incorrect interpretations of the ratio.

If the Cost Efficiency of Labor Equals 2,then