What happens over time when the fringe benefits portion of total compensation ri

Question

What happens over time when the fringe benefits portion of total compensation rises sharply, as occurs when health insurance premiums increase?

A. Cash wages will rise by a smaller amount to offset the increase in health insurance premiums.

B. The employer must increase the prices for the goods and services it sells to compensate for the higher fringe benefit costs.

C. The employer will switch health plans to one that costs less.

D. The employer will lay off those workers who have higher healthcare costs.

Explanation / Answer

Answer:-What happens over time when the fringe benefits portion of total compensation rises sharply, as occurs when health insurance premiums increase?

Correct Answer:-

The employer must increase the prices for the goods and services it sells to compensate for the higher fringe benefit costs.

Reason:- The marginal revenue earned by increasing the price will help compensate the marginal cost

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