If the Price of Capital Rises, in the Long Run

question 63

Multiple Choice

If the price of capital rises, in the long run the demand for labour

• A) definitely decreases.
• B) definitely increases.
• C) could increase or decrease, depending on the change in the scale of production.
• D) definitely is unaffected.
• E) changes only if the supply of labour changes.

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Definitions:

Investee

An entity or company in which another entity holds an investment, regardless of the existence of any voting or decision-making power.

Equity Method

An accounting technique used to record investments in other companies, where the investment's value is adjusted based on changes in the investee's equity.

Significant Influence

The authority to be involved in shaping the financial and operational policies of an investment entity, without having control or co-control of these policies.

Voting Common Stock

Shares in a company that give the shareholder the right to vote on corporate matters, including elections for the board of directors.