At the beginning of 1994, Congress enacted a 10% increase in the federal minimum wage. At that time, Charlesville Hotdog and Bee
f Company employed 4,000 employees, with over 90 percent of the workforce making minimum wage. Despite the fact that the increase in minimum wage increased the operating expenses of Charlesville Co., the company reported record profits at the end of 1994. Which of the following, if true, most helps to resolve the apparent paradox?
A. Charlesville Co. spends more money procuring cows for their Hotdog and Beef products than they do paying their 4,000 workers.
B. Charlesville Co. also saw an increase in expenses other than its wages in 1994.
C. Before 1994, the company had considered giving its employees a 10% raise, but ultimately decided not to do so.
D. The company's customer base is made up primarily of families that rely on minimum wage incomes.
E. The majority of the company's 4,000 employees work in the company's meat-packing facilities.
The answer is D. The company's customer base is made up primarily of families that rely on minimum wage incomes.
Explanation:
The increase in minimum wage increased the operating expenses of Charlesville Co. but the company reported record profits at the end of 1994. Hence, the company's recorded revenue at the end of 1994 must have increased. Among the choices, only D gives an indication for the revenue growth. If true, because the company's customer base got a higher income though a increase in minimum wage, they spent more money on Charlesville Co.'s products.
