When a firm decides to hire more workers because local wage rates have decreased, this is an example of
A) market failure.
B) substitution in production.
C) labor exploitation.
D) substitution in consumption.

Question

Quizplus · Accepted Answer

This is an example of substitution in production, where the firm is substituting labor for capital due to the decrease in local wage rates. Market failure refers to situations where the market does not allocate resources efficiently, labor exploitation refers to unfair treatment of workers, and substitution in consumption refers to consumers substituting one product for another due to changes in price.

When a Firm Decides to Hire More Workers Because Local