If a firm's demand for labor is elastic, a union-negotiated wage increase will
A)necessarily be inflationary.
B)cause the firm's total payroll to increase.
C)cause the firm's total payroll to decline.
D)cause a shortage of labor.

Question

Quizplus · Accepted Answer

When a firm's demand for labor is elastic, a wage increase will lead to a proportionally larger reduction in the quantity of labor demanded, causing the firm's total payroll to decline.

If a Firm's Demand for Labor Is Elastic, a Union-Negotiated