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You are working to develop long-run relationships with two different firms. They provide similar products. Both rely heavily on labor to produce their products. You
You are working to develop long-run relationships with two different firms. They provide similar products. Both rely heavily on labor to produce their products. You know that firm A is well-backed by foreign investment and can easily raise capital if needed. Firm B has less backing and can raise capital but more slowly than firm A. As the demand for workers increases globally, wages go up. Explain how these firms might behave differently given the wage shocks. How do they each respond and why?
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