If a large increase in the wage rate leads to a net increase in the use of land by a firm,then

Question

Quizplus · Accepted Answer

The substitution effect refers to the tendency for firms to substitute away from labor towards capital when the wage rate increases. The output effect refers to the tendency for firms to produce less output when the wage rate increases. In this case, the net increase in the use of land suggests that the substitution effect outweighed the output effect.

If a Large Increase in the Wage Rate Leads to a Net