Other Things Equal, If Wage Rates Increase by 20 Percent

Multiple Choice

Other things equal, if wage rates increase by 20 percent, the greatest decline in employment will occur when labor costs are a

A) large proportion of total costs and product demand is elastic.
B) small proportion of total costs and product demand is elastic.
C) large proportion of total costs and product demand is inelastic.
D) small proportion of total costs and product demand is inelastic.