How Does a Profit-Maximizing Firm That Is Operating in a Competitive

question 25

Multiple Choice

How does a profit-maximizing firm that is operating in a competitive labor market respond to an increase in the wage rate?

• A) The firm will demand less capital due to the substitution effect.
• B) The firm will demand more labor due to the substitution effect.
• C) The firm will produce less output due to the scale effect.
• D) The firm will demand more capital due to the scale effect.
• E) The firm will demand more labor due to the scale effect.

---

Definitions:

Olympic Athletes

Elite athletes who compete in the Olympic Games, representing their countries in various sports.

Genetics

The scientific study of heredity and the variation of inherited characteristics.

Environment

The surrounding conditions or settings in which a person, plant, or animal lives or operates, encompassing both natural and man-made influences.

Shape Constancy

The tendency to perceive objects as being the same shape even though the shapes of their images on the retina may differ when the objects are viewed from different positions.