Answering the question, higher labor costs would tend to favor the survival of large-scale capital-intensive firms more than the small firms
Large scale capital intensive firms would have the financial muscle to cope with higher labor costs because they have a high percentage of fixed assets and make more money. However, the profit margin of labor-intensive mom-and-pop shops won’t be enough to cope with higher labor costs as any attempt to do that may affect the operation of the business.
A monopolistic competitive market is the type of imperfect market structure where companies offer products and services with the hope to meet up with the demands of the consumers but not perfect substitutes. The barriers to entry and exit in monopolistic competition are very low.
As its sounds, monopolistic competitive market involves monopoly and perfect competition: all the companies in this market dictate the price of products, that is, no company has absolute control to dictate the price of goods and services within the market.
Most companies in a monopolistic market advertise heavily since their main goal is to make profits.
Therefore, higher labor costs would tend to favor the survival of large-scale capital-intensive firms more than the small firms
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