Suppose Jodi's widget business is using two inputs,labour and capital.If the price of labour increases,which of the following will happen?
A)The firm's marginal cost curve will remain unchanged.
B)The firm's average total cost curve will shift upward.
C)Jodi will shut down her business.
D)Jodi will hire more labour.
E)The firm's average fixed cost curve will shift upward.

Question

Quizplus · Accepted Answer

If the price of labour increases, it will increase the cost of production for Jodi's widget business. As a result, the firm's average total cost curve will shift upward. This is because the cost of labour is an important factor in production and thus affects the overall cost structure of the business. Therefore, option B is the correct answer. The other options are incorrect because an increase in labour cost would not keep the marginal cost curve or the fixed cost curve unchanged, and it may not lead to hiring more labour or shutting down the business.

Suppose Jodi's Widget Business Is Using Two Inputs,labour and Capital