If the price of labor falls,
A) we can conclude that the demand for capital will always decrease because only the input-substitution effect is relevant.
B) we can conclude that the demand for capital will always increase because only the output effect is relevant.
C) the change in the demand for capital cannot be predicted because the input-substitution effect and output effect work in opposite directions.
D) the demand for capital will be unaffected, because only a change in the price of capital would change the demand for capital.
Correct Answer:
Verified
Q3: What happens when a firm encounters diminishing
Q48: A profit-maximizing firm will hire labor as
Q49: Recall the Application about the salaries paid
Q50: An appliance manufacturer adopts a new technology
Q51: The demand for labor is dependent on
Q52: The output effect is defined as
A) the
Q54: Compared to its long-run demand for labor,a
Q55: The owner of Instant Printing,a firm that
Q56: Fred's Pizza Palace sells pizzas in a
Q57: The tendency of firms to substitute away
Unlock this Answer For Free Now!
View this answer and more for free by performing one of the following actions
Scan the QR code to install the App and get 2 free unlocks
Unlock quizzes for free by uploading documents