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An Increase in the Price of a Particular Factor Will

Question 36

Multiple Choice

An increase in the price of a particular factor will:


A) usually result in the substitution of other factors for this factor, and hence will cause quantity of this factor demanded to fall.
B) have no effect on the amount of it being used, according to the principle of least-cost, which requires only the MP of each factor be proportional to its price, not equal to it.
C) not result in diminished use of this factor if output is not decreased at the same time.
D) result in less employment only if firms have monopoly power in product markets.
E) cause the marginal revenue product curve for this factor to shift downward.

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