Suppose there are four industries. Labor costs are 20 percent of total costs in A, 40 percent in B, 60 percent in C, and 80 percent in D. A ten percent increase in the price of labor will cause industry ________ to reduce quantity demanded of labor by the largest proportion.

Question

Quizplus · Accepted Answer

Since labor costs are highest in industry D, it is likely that a ten percent increase in the price of labor will affect it the most, causing a reduction in the quantity demanded of labor. Therefore, choice D is the best answer.

Suppose There Are Four Industries