This strengthens the argument. If companies are primarily guided by morale considerations when deciding between layoffs and wage cuts, and--as we know from the premises--layoffs damage morale less, then it makes sense that companies will likely go with layoffs rather than wage cuts.

We aren't talking about wage increases or the difficulty of hiring employees. We're talking about how companies make the decision either to cut wages and not fire employees, or fire employees and not cut wages. \"Not cutting\" and \"not firing\" aren't the same things as \"increasing\" or \"hiring\", so this answer choice doesn't tell us anything relevant to the argument.

Irrelevant. We're not interested in whether companies will make a profit or not. We just want to know how they make their decisions to reduce costs by either laying off employees or reducing wages.

Irrelevant. The premises have already established that reducing wages is worse for morale than laying people off. Knowing the details of what happens when wages are reduced doesn't help us decide whether companies are more likely to pursue the less morale-harming course of action.

This weakens the economist’s argument. It tells us that even if layoffs harm morale less than wage cuts, layoffs come with a potential long-term downside that might steer companies in favor of making wage cuts rather than laying people off during a recession.