All else constant,a decrease in the per unit price of labor would create an incentive for a firm manager to substitute labor for capital in the firm's production process.

Question

Quizplus · Accepted Answer

If the per unit price of labor decreases, it becomes relatively cheaper compared to capital. This creates an incentive for the firm manager to substitute labor for capital in the firm's production process, as it would lower the cost of production and increase profits.

All Else Constant,a Decrease in the Per Unit Price of Labor