A Firm Negotiates a New Labor Contract with a Higher

Multiple Choice

A firm negotiates a new labor contract with a higher average hourly wage. What is the most likely effect of the higher wage on the firm's price and output?

A) Neither price nor output will be affected.
B) Price will increase but output will not change.
C) Both price and output will increase.
D) Price will not change but output will decrease.
E) Price will increase and output will decrease.