Xanadu Industries manufactures and sells the same calipers as Utopia Industries. Employee wages account for thirty-five percent of the cost of manufacturing calipers at both Xanadu Industries and Utopia Industries. Xanadu Industries is seeking a competitive advantage over Utopia Industries. Richard, the manager put in charge of devising a strategy to meet this end, suggests lowering employee wages. This leads to a grave conflict between Richard and the labor union. Which of the following, if true, would suggest that the labor union will accept Richard's suggestion to lower the wages?
A) As they make a large number of precision instruments, caliper manufacturers receive huge volume discounts on raw materials.
B) Utopia Industries recently set up a new manufacturing facility in the vicinity.
C) Xanadu Industries has taken away twenty percent of Utopia Industries' business over the last year.
D) Utopia Industries pays its employees, on average, ten percent more than does Xanadu Industries.
E) Many people who work for manufacturing plants live in areas in which the manufacturing plant is the only source of employment.

Question

Quizplus · Accepted Answer

The labor union might accept lower wages if the alternative is potentially losing their jobs altogether, especially in areas where the manufacturing plant is the only source of employment. This situation could make employees more willing to accept wage reductions to ensure the plant's competitiveness and their continued employment.

Xanadu Industries Manufactures and Sells the Same Calipers as Utopia