Question

The output effect of a change in the wage rate on a firm's demand for labor input will be greater A. the larger the share of labor costs in total costs and the greater the price elasticity of demand for output. B. the larger the share of labor costs in total costs and the smaller the price elasticity of demand for output. C. the larger the share of labor costs in total costs and the higher the quantity demanded. D. the smaller the possibilities of substituting capital for labor.

Answer 1

A. the larger the share of labor costs in total costs and the greater the price elasticity of demand for output.

Step-by-step explanation:

In the case when there is the change in the wage rate so the output impact on the demand of the firm with respect to the labor input should be greater. And, if the share of the labor cost should be greater in the total cost also at the same time the price elasticity of demand with regard to the output is higher

Therefore the option A is considered