2!}. Unions most liker form when Firm prots are relatively high. Firm revenues are relatively high A. B. C. D. E. The supply of workers is relativer inelastic. The demand for workers is relativer inelastic. None of the above. 21. Labor demand is less elastic a. the greater is the supply elasticity of capital. b. the greater is the elasticity of substitution between labor and capital. c. the smaller is the elasticity of demand for the rm's output. d. the greater is labor's share in total costs. e. a, b and d above. J. J. 22. The production mction with which Firm #1 produces is: Q = L' K 1 where Q equals output, L equals labor and K equals capital . Firm # 2 has the following production mction: Q = 5L + 5K . PFPF'F Firm #1 has a more elastic demand curve for labor. Firm # 2 has a more elastic demand curve for labor. Each rm has the same elasticity of demand for labor. Firm #1 has a completer inelastic demand for labor. Not enough information is provided to assess the relative elasticities of each rm's demand for labor. 23. What is an example of the scale effect? a. The rm decides to expand output when the wage falls because production costs have fallen. b. The rm decides to expand output when the price of capital increases because production costs have risen. c. The rm decides to hire more labor when the wage falls because labor has become relatively cheaper compared to other factors of production. d. The rm decides to hire less labor when the wage falls because labor has become relatively cheaper compared to other factors of production. e. None of the above