Suppose that, for country X, the labour cost per hour has remained the same while unit labour costs have increased over the past five years. Which of the following can be correctly inferred from this information?
Country X has a cost advantage compared to other countries.
Most of the firms in country X are operating at constant returns to scale.
Wages in country X are likely to have been increasing in the past 5 years.
The quantity of output produced per hour has been falling in the past 5 years.
Explanation
Bringing together costs per hour and output per hour gives a measure of unit labour costs, i.e. the cost per unit of output. Since cost per hour has remained constant, an increase in unit labour costs means that output produced per hour has been falling.