Assume a firm is run as a zero-profit enterprise. Which of the following would be TRUE?

A) There is a higher probability that wage reductions would outweigh layoffs.
B) Those in charge would not act any different than regular owners, there would still be layoffs.
C) Those not in charge would remain risk neutral.
D) Wage reductions would be lower than they would be if the firm was run for profit.

ANSWER:

A) There is a higher probability that wage reductions would outweigh layoffs.